Because if they don't do one of the two then they will be forced to go with the next few options which looks something like a short sale or even Foreclosure. If their agent has not advised them of this then it's possible that he/she is not a "great" Realtor.
Oh well. We will find another.
As another measure, just look at the changes in selling prices from the last quarter to listing prices. Selling prices are down from 10-45% in the areas we're looking at, and listing prices are almost exactly the same. Obviously, there's a disconnect somewhere.
Secondly, all listing at MLS are priced correctly by licensed realtors who get no commission if they do not price right, even worse, they may end up lose their marketing expense and time and effort if they overprice their listing. So, you should not doubt the listing prices. When listing agents doing market analysis, they all based on current market sale, and they are the people got the first hand info.
Thirdly, it is really silly to try to offer 100-150k less than the asking price on a 500k home. Why? because no only it makes you, the buyer look inserious, but also make your agent looks unprofessional. And the fundermental thought of this is that if a house worth $500k with down payment 20%, there are still $400k mortgage, do you think buyer would want to come to money to closing table with money they save for down payment of next home? No!
Most people listing their homes are because they want to take advantage of the collapsed mortgage http://www.bankrate.com/brm/graphs/graph_trend.asp?product=1 and move up to bigger house http://riverheightsestates.blogspot.com/ but they want to play safe and sell before buy, that's why you see many listing. However, if they do not find a reasonable buyer, they would just stay where they are and take off market.
So, it is a great chance for everyone to move up to bigger home, but if you find your dream home out of many choices and make a stupid decision based on what those dishonest TV forecasts, and you may end up NEVER able to live in a home at the great location you and your family always dream about.
So, based on YOUR need and the value of the home to YOU and YOUR family, NOT other nonsense. Good Luck!
Your comps could be coming from homeowners who had bought before the housing bubble.
This is a just one possibility.