How much should we bid on a $294,000 home?

We live in the northern suburbs of Chicago. The house we are looking at has an asking price of 294,00.
Our agent suggested starting out the bidding at $275, 000, however this is not a sellers market. The home was appraised in 2006 for $280, 000, and from what I have read, most propertys (thanks to our economy) are worth 10% less than that.
Most people (other than our agent), believe the first bid should be 20% less than the asking price. My husband & I agreed to our first bid of being 245,000 & then see how motivated/interested the sellers are. We are first time home buyers, but have spent the past year researching and looking.
Most houses (in the similar price range) sold around 270-280,000.
Any thoughts would be appreciated :)

Depends on how bad you want the house. Unless someone is desperate, they won't take 20% less, buts thats a good start.

Do you really want the house or do you want a deal?

Are you willing to walk away if they don't come down?

Your agent just wants more commission. Thats why I don't use agents.

I would go with the advice of your agent. They are in the best position to offer advice. They know the local market and probably have received some clues from the selling agent as to the mood of the selling party.

I assumed that your agent was representing you exclusively - by chance is the agent also representing the selling party? If so, please go and find your own agent.

It depends on how badly you want the house. We just lost out on a house we wanted badly by bidding too low at first because our agent told us the houses around it had sold for about that price range(the price we bid). However, the house we bid on was much nicer than those around it and had what we wanted. So we lost out and are now kicking ourselves as we have yet to find anything close to that. I'd say 275,000 seems a bit high for a first bid, but if it is truly the house of your dreams and you havn't found anything else like it, then I would go with what you can comfortably bid.

If most houses in that price range sold at 270-280, then $275 should get you the house and is a good offer. Since we are definitely in a buyer's market, you could offer a little less than the usual 90% opening offer, but if you want the house pay a little more to get it. I wouldn't rely too much on any 2006 appraisal, especially if this is an appraisal by the county auditor.

They are asking 294k for a house that appaised at the peak of the boom at 280k? So while the rest of the country was depreciating, that particular house happened to appreciate? I would make sure those houses that sold for 270k to 280k had sold in the last 3 months because if they sold in mid 2007 for that, then its still overpriced.