Hi Jessica, congratulations on finding a home you like that is in good condition!
The Zillow value (they call it a Zestimate) is not always accurate in my opinion, although it has gotten better in recent years. That said, I agree with my collegaue Gina below. In this economy/market, I feel $180,000 is a good starting off point. I do not feel it will be taken as an insult by the Seller. Most importantly, make sure you choose an agent that is effective in negotiating the best price for you. I have much experience in getting my clients the price they want. I can hold firm without jeopardizing the deal. I have ways of presenting your offer in the best light so that the Listing Agent is more likely to advise their client to play ball with you.
Are you working with a Realtor? If not, I would certainly advise you have representation, either by a Realtor or an attorney or both, so that your best interests are protected. It shouldn't cost you a thing as the Seller usually pays the Realtor commission.
If you will allow me to, I would be happy to "pull comps" and give you a range I feel the home is worth. I am available all day Monday to work on your case if you like. Just call or email in the morning with the address or MLS number.
Eric Axelson, Associate Broker
Kurfiss Sotheby's International Realty