Bigbet, I am in the housing market right now but I am on the selling end. When I put a house on the market I will set it so that I have room to come down. For instance, I am setting the one I have right now at 108,000. I will go down to 100,000 if thats what it takes.
Remember this one qoute that has saved me tons in the past "He who speaks first, loses."
Now that may not help you in this case because he has already marked his price. However, don't be afraid to go to low. Go crazy first if you want, you never know if they are wanting to get rid of that house. How long has it been on the market? If its been awhile they may be itching to dump it. Are there other buyers looking at the house?
The last house I bought I offered the full asking amount the day I saw it because I knew there were 4 other cars there that day looking at the house. Had that not been the case I could have saved myself a few thousand or though.
It all depends on the situation, but realize with your offer you are going to have to have a $1,000 earnest check which will solidify your offer. Meaning, if they accept your offer and then you decide you don't want it. . you can say goodbye to that $1,000.
Go low first, they can always counter offer with you.