The bank doesn't even take a look at the property. It is the listing agent (with the homeowner) who establishes the listing price - which is usually very aggressive and many times under market value, and it does take into consideration the age and condition of the house.
After the bank receives the offer they hire another agent (Realtor) to do a BPO (Broker's Price Opinion) on the house - who also takes into account the age and conditon of the house and adjust it with nearby comparables.
FYI, short sales are generally very aggresively priced (sometimes too much) and it is very common for the bank to want more than listing price. Your agent will be able to do run comparables for you, do the appropriate adjustments and tell you what a good offer should be.
Carlos J. RamÃrez, PC, ABR, CNE
Associate Broker/Realtor, HomeSmart â€“
Certified Negotiation Expert (CNE)