There's a great article today in the Real Estate section of the Post: "The Art of Lowballing": http://www.washingtonpost.com/wp-dyn/content/article/2008/05/30/AR2008053001502.html
I can't tell you how many of my clients have tried this tactic this year. It's a frustrating process for an agent because we know how it's going to be received by the seller...they're going to be pissed! It also might ruin the chances of the deal being successful. I think all buyers need to realize that the sellers are emotionally attached to their property. They love their place. That's why they bought it. That's why they are selling it for "x" amount. "Don't insult me by offering 100K less than the listing price."
Realistically, these offers are happening A LOT in this market. As I mentioned, I've written a few. Since I work with sellers and buyers, I know the emotions and logic behind the writing of the low ball offer and the rejecting of a low ball offer. It's tough to negotiate this type of situation on either side.
The article has several great points:
1. The low ball is NOT going to work in a popular neighborhood with a lot of competition. (Yep..that neighborhood is popular for a reason and they will laugh at your offer. Loudly.)
2. The low ball WILL work if the property has been on the market for a lot of days and the seller is becoming desperate. It will work with new construction projects in SOME instances.
3. If you're employing the low ball strategy, count on writing a number of offers before you're successful. And listen to your agent. We do actually know what we're talking about when it comes to these situations.