What is a house worth?

Or more specifically, what is this one particular house that we want to buy worth?  Is it worth the asking price?  Or is it silly to offer full price straight away?  Does the old septic system and cracked garage floor lower the value?  Or are those issues already figured into the asking price?  Is the house worth more to me than someone else?  Or perhaps someone else is willing to pay a higher price than I am?

We want to put a bid in on this house.  The house is owned by HUD currently.  We can work through their rigid offer process, and we can live with some of the restrictions involved.  The really annoying part is the way they handle the bids.  Unlike dealing with a private seller, there’s no way to know how many bids have been submitted, and no way to know what bids were turned down, until it’s too late.  All bids are accepted until Sunday night, and on Monday morning, they’ll post the bids and announce who won.  There’s no second chance, no ‘highest and best offer’, just the winning bid. 

So, when you’ve only got one chance, but don’t want to overpay, what is a house worth?