I've bought a lot of real estate and always start out much lower than the asking price. They will either counter or simply decline your offer. Typically they will counter somewhere below the listed price so you get the price going in the right direction. At some point you may reach a stalemate where neither of you will budge, then it's time to move on and look for something else.
Don't worry about hurt feelings, etc. They aren't your friends and probably won't be after the sale either.
Just get an offer out there and earnest money in the realtors hands so they know you are serious. A cash offer with approved financing or no financing required for a quick close pulls a little more weight too. You can always raise your offering price, but you won't very easily be able to go down in price after the initial offer.
Sharing comps, writing letters, etc. is largely a waste of time. They're going to take whatever amount they decide to take.
There seem to be various stories where sharing the comps helps. Impossible to know if coincidental or not. I'm not counting on it helping, but figured it was worth a shot. I also learned a lot in the process; both about the local market as well as how to comp houses. For this reason alone, I would not consider it a waste of time. It also increased my own confidence in our position.
It's really up to the seller. Presumably a flipper has done his/her research, but this guy went in and bought a 2-3 BR ranch house, fully renovated it, and then put it at a price that was encroaching on the prices of nearby mansions and luxury estates. He has already dropped his dropped his price ~10-15%. Another 10-15% would put it at aggressive market value.
The major issue is the size of the house. Due to small size, it is listed at >$350/sqft, which is an insane price. In my area, luxury homes go up to $220/sqft as an absolute upper limit. Actually, the MLS listing of the house indicates it is >$500/sqft, although this does not afflect a couple additions... but it is what everyone sees first!
If you give him the full basement squarefeet he wants to include in his assessment, it $210/sqft. This is mostly where I debate, because basements are not usually given full value. Also, if you see this basement, it becomes more clear that it is not of optimum use.
As an above poster indicated, all that matters is whether someone will buy it at a certain price, and more particularly, how long that will take. There are a few comps in the area that have sat at this price point for ~1 year, and they are significantly larger houses. I presume most people don't want a smaller home with a small lot, which is in fact what we want. My rationale is that the house is located in a very wealthy area which borders with rich estates and such... buy hey, maybe i'm wrong.
Anyways, for these reason, I think the house is unlikely to get much attention until they drop the price a bit more. Perhaps he will see my comps and realize this... or maybe he'll think I'm full of shit. He's already switched listing agents/brokerages once... maybe this agent will talk some sense into him. There's always the risk that someone with deep pockets will swoop in take it, ignoring the logic. Of course, this is out of my control. All I can control is not making too much of an unsound investment.