You mentioned that the home is "one of the biggest", but not necessarily the most expensive. If it IS the most expensive because it was overbuilt for the neighborhood, I'd strongly advise that you DO NOT pay much more than the average price in the subdivision. To do otherwise would make someone else's mistake your own.
If you're purchasing without financing, get an appraisal and make your purchase subject to that appraisal being equal or greater than the amount you have agreed to pay. if you're using a lender, ultimately, it's the lender's appraisal that will be the one that counts, and that will force an adjustment in the price.
Appraisals are coming in tight these days, and that's good. If the subdivision doesn't have sufficient comps to justify the asking price, consider that a warning. If the appraiser is liberal in their appraisal, you may end up buying a home that could turn out to be a poor investment. So, I can't say it enough. Be careful!
To answer your other question, "What is a fair offer?". I'd say, what you're willing to pay based on the information available to you. The seller has a right to ask whatever they want for their property, but it has to be based on more than their desire to make as much as they can. Make an offer that you feel is reasonable, support it with the facts as you see them, and be prepared to walk away if they won't accept reality.
RE/MAX Greater Atlanta