I just looked up the history on this home, and it was listed last year for 6 months at $668,000 then $645,000 then $625,000. It was relisted in Dec 07 at $499,000 then $399,000 and now $375,000 this is a short pay listing, and it is not just up to the owner of the home to decide what price will be acceptable. The bank or banks that are holding the note (s), need to approve any offers that come in, because at this price, there is more owed on the property than what they will be able to sell it for. I didn't look up the mortgage balances, but this could explain why they may not be going any lower. If you do have an interest in the house to purchase, I would just go ahead and make an offer based on what you think the fair market value is and what you and your agent think is a fair price for the home.
A lot of people are steering clear of " Short Pays" as they are anything but short, and require a lot of patience, and may cost you more in the long run. Best of luck to you!
It can be puzzling sometimes when things don't add up. I do not know the specific home you are referring to, but I can tell you every market has a home that makes you go "hmmm". I would suggest that if you have an interest in purchasing the home, then make an appointment and go see for yourself, who knows.. you may be pleasantly surprised. However there is the chance that your instinct is right on, if that is the case, well ... get comfortable, because it sounds like you will get to "watch" this one on the market for quite some time.