Alma's advice is good in theory, but questionable in practice. Relatively few sellers are willing to pay before listing their home. If they're willing to, fine. But it's not going to happen often. And very few buyers are going to pay for an appraisal before making an offer.
So what do you do? As a listing agent, you provide some comps. You explain the variations (to the best of your ability), and compare the comps to the house the seller is planning on listing. In most cases, that produces a manageable price range. As a buyer's agent, you do the same.
If you're worried about getting sued as a listing agent, do your best (which you should do anyway) to make sure that the "comps" are legitimate comps.
You explain that setting a listing price is both an art and a science. Similarly, making an offer involves both as well. One may be able to determine fairly closely (the "science") what the house is worth, based on the comps. The art is in how the offer is presented, the seller's motivation, the buyer's motivation, and other factors.
From a listing agent's standpoint, it doesn't make much sense to take overpriced listings. Odds are, the house won't sell. The sellers will grow increasingly irritated/angry as the house sits there, month after month. (I answered a question here on Trulia earlier today from someone whose house has been on the market for 8 months. I looked at the comps and the house is seriously overpriced. The agent isn't making a commission and the sellers aren't happy. Where's the benefit?)
You ask about being sued with your client having "proof" that your advice was incorrect. What constitutes "proof"?
If someone lists a house and gets an offer the next day, is that "proof" that the price was too low? Not necessarily. Maybe the home was in a desirable community. Maybe there was something about the house that appealed to that buyer, but wouldn't appeal to others. And we all know that, often, the first offer tends to be the best one.
If a buyer makes an offer and it's accepted without a counter, does that mean that the buyer offered too much? Of course not. If the buyer makes an offer and it's rejected, does that mean that the buyer offered too little? Well, yes, too little for the seller. But maybe the offer was a fair one based on market value.
It comes down to providing complete, relevant, and useful data to your client. And letting your client make the final decision.