You should offer what it's worth.
Ron's likely correct that an investor bought the property, did some fix-ups on it, and now has it back on the market.
However, it very well could be a good value now. I was at a seminar earlier this morning, and heard a panel of rehabbers talk about buying and rehabbing properties. Uniformly, the last thing they want is a property to sit on the market for a long time. So, in one case, after the rehab was done the rehabber had a Realtor run the comps. The comps came in at $250,000. The rehabber wanted a quick sale, so she priced it at $229,900. (Yes, there was enough profit in there even at that lower price.) The house sold in 5 days, and the buyers--first time homebuyers--got a real bargain. Another rehabber told a similar story.
So I wouldn't be surprised if the comps on the house you're asking about actually are in the range of $170,000-$175,000. You may want to bargain the price down, but someone else might come along, recognize it as a bargain, and pay very close to the asking price.
So, what you should do is to ask your Realtor to run the comps on the property. Pay no more than that. Likely offer less. But be prepared to find out that the comps are actually higher than the asking price.
Hope that helps.