After having several clients write offers on different properties, most were rejected because of multiple (and over asking) offers. Interestingly. three of those properties still have not closed Escrow. My clients also offered over asking.
The most important issue facing a home buyer in this market is this: When you are procuring a loan, If the last several sales (in the area) do not support the accepted sale price offer, the home will not appraise at the purchase price, and your loan will not be approved.
Your banking institution will hire an appraiser to investigate the market value, he/she will give an accurate value of the home.
If you are willing and able to present an all cash offer, obviously, no appraisal is necessary.
In 2004 a family member passed away and in order to put the estate in order, we had to have the home appraised. Instead of going into the home, the appraiser did a "drive by" and his report gave an inflated value of the home. When we balked at the value, he agreed to go into the home to do a detailed appraisal report. We were not surprised when the appraiser came back with a 100K less value. Unfortunately the elderly owner didn't do necessary repairs and maintenance.
Those days are thankfully over. The housing meltdown of 08' is not the fault of appraisers, it was a combination of many factors, some of which were low inventory and multiple offers. Most of the problems were the shady lending practices.
One of my colleagues suggested that the cash buyers coming in from other countries and investors will drive up the value of of our community. I do agree with that.