Help me decide what to offer?

[Kim Rock]

We are looking to buy a "starter home" to live in a few years, fix up and then either rent out or sell (depending on the market) and buy a bigger house when we are ready to start a family. We are looking at reo's so we can get a good deal, put some sweat equity into the house, etc. Found the following listing the other day:
The listing price is 175k - it was originally listed as high as 219k and has been on the market for about a year. the 175k price drop occured in the last week. Homes in that area that are nicer tend to sell for about 210-230k. This one is in much need of fixing up - it seems structurally okay but needs all the normal cosmetics along with a missing toilet and shower in one bathroom. What do you feel would be a good starting offer price based on the scenario?