If you wish to purchase it yourself, it is safest if you pay your mother the full appraised value in order to avoid the claim that she made a gift to you. Obviously, any transaction between a parent and child is suspect as far as Medicaid is concerned, since the natural inclination is to make a gift to the child.
If the house is put on the market, some states have regulations that exempt the house unless an offer of at least 2/3 the appraised value is made. That is supposed to prevent penalizing the owner from a fire-sale priced forced sale.
Nothing prevents you from seeking another appraiser; be sure to tell them your experience in trying to sell it at that higher price. However, if the appraiser selects three or more comparable sales in your general area, and properly adjusts for any differences, then the appraisal should be accurate.
A proper appraisal of the house should take into consideration any deficits such as the condition of the roof, basement, etc., before arriving at the market value. After all, any potential purchaser would consider that, too.
It sounds to me like you did not get an accurate appraisal. I
