John Zurflueh:I believe the home is overpriced by about 10%.
This is easy. Offer a little more than 10% under the asking price. And then negotiate up to what you think is a fair price . . . what you are willing to pay.
John Zurflueh: I'm unsure of how much help I'll get from the comps I get from my agent because it's a custom built home.
Certainly there are other homes in the area that can be used as comparable sales. Just because a home was "custom" built 35 years ago doesn't mean that there aren't homes that can be used for comps and adjusted for differences in quality of construction, etc.
John Zurflueh: Most of the other homes we've looked at had sales in the past 10 years that I ran against industry data like the Case-Shiller index to help baseline what I think is the fair market value.
John, it's admirable that you are paying close attention to property values and you don't want to overpay for your new home, but the Case-Shiller index and sales in the last ten years have little to nothing to do with the current market value of a specific property. What you should be looking at are recent sales of comparable homes and current property value trends (up, down, stable).
John Zurflueh: The house needs some work, e.g. a new roof and a few other items. Should I be decreasing the offer to cover those items up front or negotiate a credit or lower price when they come up on a home inspection?
Either strategy may work. I would rely on your agent to advise you with their experience of local custom. Also if your agent is representing you they should be able to provide you with the sales data and an analysis of that data (i.e. comps and adjustments) called a BPO or Broker's Price Opinion. If they are unable or unwilling to provide that data you may want to find another agent that is more competent or employ an appraiser to give you their opinion of the value. The data is in the MLS. The problem you have is even if you are given that data it doesn't mean much unless you are able analyze it. A good analysis (appraisal) requires more than the raw data. It also requires experience of the local area. If you read about problems with HVCC one of the complaints you will find common are inaccurate appraisals on properties by appraisers not familiar with the area. Those appraisers may have the skill, buy lack the local knowledge. If you are not an appraiser or agent familiar with the local market; have access to the MLS or tax data; and have the skills necessary to analyze that data; you will be unable to determine an accurate estimate of the market value to guide you in what to offer for the property.
The insight I hope you gain from what I am trying to say is that you need competent, local, real estate professionals that you trust and that are willing and able to guide you in your offer. Good luck!