As the others here advise, don't look at discount off the list price. The house may be overpriced, and a 20% discount may be no bargain. On the other hand (though less likely), the house may be such a great deal that being there first, with some discount less than 20%, may give you a great value.
Remember, too, you're looking for a desperate SELLER. (Or, better, a motivated seller.) You're not looking for a desperate HOUSE. If the seller's desperate enough (whoops, motivated enough), you can correct things like floors, or add a garage.
And while you're at it, consider looking beyond listed properties. There are plenty of other properties out there (everything from FSBOs to pre-foreclosures) that may not be listed. And for Realtors concerned that I may be suggesting a way to avoid a commission: not at all. Find a good, creative buyer's broker. Cover everything that's listed, and have your broker search out things that aren't. (Hint: There's less competition for houses that aren't listed than for those that are.)
Hope that helps.