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tbc
It's not really the estate agents that are being screwed though, it's the people trying to sell. Obviously depends at what point you come clean but accepting an offer, stopping viewings and then being told "we've decided to buy somewhere else" would be a pisser for the person selling.
If it's just an offer then that's one thing but it depends how far you take it.
@Howard I guess your guidance is probably, would you be pissed off if someone did it to you. Generally a decent indicator. In your scenario I'd tell the overpriced one that although you prefer their property you'd also made another offer as you felt it was overpriced.