Tman makes a lot of good points, albeit perhaps a bit bluntly.
There seems to be an assumption on the part of both buyers and agents for buyers that the "list price" of a house pretty much reflects the house's value...that maybe it's 3% overpriced, so you make an offer at 3%-5% under list and everyone's happy. Now, good agents will run the comps and advise the buyer on what other houses have sold for. And good agents will also suggest a strategy for bidding. And there are some good agents out there. When I bought my first couple of houses, I had some very good agents. But, frankly, many aren't that good at negotiating and many don't run the comps.
Let me let you in on a few more secrets and reasons why buyers are reluctant to make low offers:
Some are intimidated by the whole process. They figure that if a house is priced at $165,000, then that's its price, minus a bit of wiggle room. There's already a seller who's bought into that price. There's the seller's agent, who's bought into that price. There's the buyer's agent, who probably has done a search on the MLS for properties in the $160,000-$170,000 price range, and so figures this one is probably worth about that. And here comes the innocent buyer, who only buys a house every 5-7 years. Does he/she want to buck the system? No. Especially if he/she has been preapproved for a $165,000 mortgage.
Second, there's the American fear of negotiating. And if Americans (and I'm a 3rd generation American, so I'm all too familiar with the mindset) do attempt to negotiate, they feel the need to "split the difference." Why? Because that's what we've always been taught. So, to use your example, if a house is priced at $165,000, but a buyer thinks it's only worth $150,000, the buyer figures, probably correctly, that his offer of $150,000 will be countered at $157,500. That's still overpriced, and there's no way to get the price down. Best the buyer can do now is counter again at $154,000 (again splitting the difference), with his agent wispering in his ear that the seller probably won't accept it. And if you go with the old "split the difference" strategy, the buyer has to make an initial offer not at $150,000, but at $135,000, so that the difference can be split at $150,000. And now all the agents are likely to scream "low ball," even if $150,000 is a fair price.
Plus, some agents don't like getting the reputation of submitting low offers. In the same way some agents will only accept pristine or upscale houses. Anything less would damage their reputation, they feel. Also, a low offer can make the listing agent look bad if the listing agent recommended the listing price. Imagine Sally Seller yelling at her agent, "You told me that my house was worth $165,000. But here's an offer for $130,000. What are you, stupid or something?"
Here's another secret, though. If the agent had recommended listing it at $150,000, but the seller responded, "Well, let's see if we can get more. Let's try at $165,000, and if it doesn't sell in a few weeks, I'll drop the price," then the listing agent may actually welcome your low offer. It's a reality check for the seller.
Hope that helps.