I would think that asking a vendor to drop their price by 20% is a little ambitious (sp)
It the house has a bank value of 220-230000 then that's what the bank would expect to get for it if they had to repo it. That's why bank valuations tend to be on the conservative end of the market.
I think you need to forget the bank valuation and compare this property to others on the market, and make any offers accordingly.
But hey, you never know....
Good luck