Excellent question. The answer has a lot to do with how well the listing agent sets up expectations for their seller in regards to possiable offers. When I take a listing and discuss possiable offers that we might get on the property, one of my main points is do not be insulted by a low offer. The seller should be insulted by everyone who came through the home and did not submit an offer. You like the home enough to write an offer on it, that is a positive. When I recieve a low offer on a property, as a listing agent, I tell my sellers "Well we know how low they will go, now lets find out how high they are willing to go."
You also need your buyers agent(if you have one, if not, please seek one out) to show you some comparable sales from that neighborhood. It might be that they priced it below market due to the location already.
So my advice is go ahead and make the low offer and see what kind of response you get out of the seller. Just be prepared for a no or a counteroffer of full price. Best of Luck to you!