HI Yo Zip:
It seems like a number of people have asked questions like this recently. Unfortunately there is no right answer. If the home is underpriced significantly, then you probably want to get in a 100 percent offer before someone else does. If it is overpriced by a large factor, then you want to offer what your instincts tell you the home is worth. Unfortunately, you probably won't get a badly overpriced home, because the current owners apparently think a lot of their home and they will not listen to reason, at least until the home sits on the market for a while.
But most homes are priced near to their true value, which means you and your agent should do some research and come up with an offer than feels comfortable to you. I think the negotiating mistake many of us make is trying to second guess the other side. In the end though, you really should look inside yourself to find a figure that you are comfortable with. Then don't worry too much about what the current owners think. You want a deal that works for you. They will look out for themselves.
Prudential Real Estate of the Rockies