If a web space reseller has overselling enabled, it's not a problem. They are still limited to their account HD and bandwidth constraints, so a properly managed server (account wise) will have no problems.
As for "dodgeiness" virtually every mainstream host will oversell their services, most hosts use a 15% overselling rate. There is no problem with a host overselling at a rate like that, since clients generally only use half or less of their resources. But when you get companies desperate to squeeze out the extra buck, then you're in trouble.
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Most webhosts practise overselling. Overselling is present in many industries. Your ISP probably oversells, offering X amount of GBs per month, but in reality they could not deliver all of that bandwidth if every customer decided to use it. Unfortunately, there is no correct formula to overselling, resulting in dodgy providers clearly being irresponsible.