Pretty good advice already.
I'm going to take a stab at guessing what's going on. (I market a lot to out-of-town owners, and it turns out that a lot are in similar situations.)
You say the owners went into a nursing home. It's likely that one or more of the children of the owners is/are the trustee. At the very least, the child or children have power of attorney to sell the property. (Go online and look at the tax records. It may list the elderly owners, or it may say something like "John Jones, TR" or "John Jones, Trustee." In any case, though, someone else is making the decision.
If the owners have multiple children, what's probably going on is that one of the kids wants a lot of money for the house. He/she probably needs the money. The other children just want to sell. After all, the house is costing them thousands of dollars a year in taxes and insurance. But one child can hold up the entire sale, so the others have to appease him/her.
Where'd they come up with the $229,000 price when you're suggesting the comps would put the price at maybe $125,000-$150,000? Could be a couple of things. First, most likely, either they had the house appraised several years ago--when the owners went into the nursing home--when the market was at its peak, or there were other sales in the community at that time for about that price. Either way, the children (or at least the one who needs the money) has convinced himself that the property is worth $229,000.
As for the listing agent; he/she knows it's overpriced. Still, the agent is hoping for some offer to present to the children. And the agent hopes that the offer will inject some reality into the situation and that the kids might actually accept it. Some money is better than none. The agent would like to sell the place, but he/she isn't experiencing the urgency that would arise from someone who absolutely needs to sell.
So, what do you do? First, let's clear one thing up. You're permitted to make any offer you want. Period. Reasonable or unreasonable. High or low. It's your absolute right to make an offer. If you're not comfortable with your current agent, have a talk with her and then consider all your options regarding representation.
Next, you might want to pin the value of the property down a bit more. We've got kind of a wide range already, and you don't know for sure exactly what repairs need to be done on the inside. You really ought to pin it down to maybe a $10,000 range.
Next, you make an offer. Your offer should be no more than the comps suggest, and in most cases less. If, after further research, you determine that the house in its present condition is worth, say, $135,000, then you make an offer of $135,000 or less. And you accompany your offer with your research justifying the price you're offering. If the offer is rejected, wait 4-6 weeks. Then make the same offer again. If it's rejected, wait 4-6 weeks and make the offer again. At some point, the children will come to understand that you're a serious buyer...and that there aren't any others out there.
That's what you do.