It all depends on how much you want the house and if the house is worth $500k or higher to you. Yes, she may want you to add more if the other bidders increases their offers, but then you don't have to. It is your choice to increase. Your agent is simply giving your advantage to make decision. You would rather have this information than not (how many other offers, their price range). This is the advantage you get by working with the listing agent or the friend in her office (in this case).