This is my first time commenting on this subreddit, sorry if it doesn't meet all the requirements

Very desperate indeed. The men from the Eastern front had been used in the Michael Offensive in early 1918. This offensive had been very successful tactically, but failed to capture any strategic objectives and cost the Germans well over a million casualties. By contrast the allies had in fact more men on the Western Front at the end of the offensive than they did at its onset, and overall enjoyed a substantial advantage in resources and manpower over the Germans.

Americans were arriving in substantial numbers and the Hundred Days Offensive leveraged improved tactics and massive resource advantages to push the Germans out of all the territory gained during Michael and eventually back to the Hindenburg Line. Moral in the German Army was incredibly low. There were reports of regiments returning from the front harassing the men sent to relieve them, calling them "linebrakers" (scabs) and accusing them of allowing the war to continue. Men were surrendering en-mass almost daily. There was even a mutiny in the Navy. The fact that the German Army was able to mount an effective defense, even mounting counterattacks at strategic points, is a testament to it's quality. Nevertheless, the Hundred Days Offensive made daily progress, and eventually the German high command came to the inevitable conclusion that the army had come to the end of its ability to prosecute the war. By 1918 Germany had exhausted its manpower reserves, its lines of credit, and its willingness to continue fighting.

I'm relying on Strachan's History of WWI here: By September of 1917, there were food riots occurring in numerous cities of Northern germany. By late October, 1918, the Wilhelmshaven and Kiel Mutinies had occurred. Revolting sailors had joined with socialists of the SPD and formed communes in Kiel and Wilhelmshaven, and it was spreading south rapidly, to Hanover and Hamburg.

So the War Council panicked. They believed that they were dealing with a German Revolution of a scale and severity comparable to the Bolshevik revolution. This mixture of panic and exhaustion is clearly evidenced in Ludendorff's letters and correspondence from the late 1918 period.

The acquiescence occurred because the high command believed that civil war was imminent, and that they needed every resource available to stave off a total Spartakist revolution.

And given the fighting that took place in Berlin, they had a reasonable basis for that belief.

In a sense, Russian communism had won World War One for the Allies, but not in a conventional manner.

Outside of a military context, Germany was definitely on her last legs. The British blockade meant that food imports which the country relied on were drastically reduced, and sources on the continent were drying up. Meat and 'bread' (ersatz bread meant that it was tough and mostly made of substitute materials) were in low supply and potatoes were so scarce that turnips were widely used instead (leading to the so-called 'turnip winter' of 1916-1917).

The limited availability of continental resources for the home front was for a number of reasons. Firstly, supply was prioritised for the army, meaning that most food that was available went to the western front, and even then there wasn't much to go around. Secondly, Germany was also helping to sustain the Austro-Hungarian Empire, where the situation was even worse, and thirdly the grain supplies that were expected from victory in the east (mainly Romania prior to Brest-Litovsk) weren't as plentiful as hoped, and also boats transporting these up the Danube were hijacked on the way to Germany in places like Vienna due to their desperation.

Also inside Germany, farmers had a far greater incentive to sell the produce they didn't keep for themselves to the black market due to the high prices of foods, so supply from within the country was also highly limited.

Most of the information here comes from Herwig's The First World War: Germany and Austria-Hungary and I would definitely recommend it if you want to see these countries' perspectives on the war in greater detail.

The military situation Germany was in by the end of the War has been very well explained by others here. There's one thing I'd like to add, in direct response to your question:

How desperate was the situation for Germany prior to Versailles?

If you're asking about the reasons for the armistice Germany agreed to on 11 November, this has been answered. By November 1918, Germany stood alone, against an overwhelming Allied force, with all its allies having already surrendered. Militarily, there was no hope, which is why Germany agreed to an armistice.

The terms of this armistice were military in nature, such as the removal of all troops from occupied territories, as well as from parts of Germany (west of the Rhine, for example). They were not peace terms at all, nor were they the harsh conditions of the treaty of Versailles.

Negotiations for the peace treaty that would become known as the Treaty of Versailles did not begin until 18 January 1918. The German delegation was only told about the treaty months later, in May. By this time, the armistice had been in place for 6 months. The Rhineland was occupied. The German navy was interned in Scapa Flow. The German army no longer existed as a fighting force.

So, to answer your question, by the time the German delegation was told the conditions of the peace treaty of Versailles, Germany was in no place whatsoever to offer any kind of resistance. Even so, the German government refused the terms at first (prime minister Scheidemann resigned rather than sign the treaty). But in the end, there was little any German government could do other than accept the terms.

EDIT: For further reading, especially for the time leading up to the armistice, and the time between armistice and Versailles, I would like to recommend something a little different: the memoirs of British journalist and war correspondent Charles Edward Montague (compiled by Oliver Elton) and German artist Käthe Kollwitz (there is an English translation, according to Amazon, I have only read the German version). They are excellent sources for the feeling in Germany between armistice and peace treaty, and cover a lot of other very interesting aspects of this tumultuous time in a firsthand perspective.

May I add to these other excellent answers that the Germans lost precisely because of a fairly new phenomenon, total war. This basically meant that even though they were winning battles they still had other problems to deal with, the most troublesome one was the food shortage caused by the British blockade, that was demoralising not only for German civilians, but also the soldiers. After the spring offensive( which contrary to popular opinion was a desperate offensive that had a very slim chance of success) failed, German soldiers deserted, sailors mutinied, and later the population was rebelling, this forced the Germans to surrender and taught them a very important lesson on modern war.

Plus, as many people here have already pointed out, Germany was practically a dictatorship by 1918, so you can guess why the population weren't very satisfied with the situation.

Another reason why in 1918 the Germans surrendered, although massively overrated, was America entering the war. This made the weary German army's morale collapse, since they suddenly found themselves fighting against not only many more enemies, who although not experienced were still fresh troops on the allies' side. The "doughboys" as they were called only arrived in full force in 1918, so when they did get to the front line, roughly numbering one million men, the German soldiers(and the population) understood that the war was over.

TL;DR Although the Germans gained a lot of territory on land, they were being blockaded by the Royal Navy, they were seeing their enemies being reinforced by more fresh troops, their allies were being beaten back or forcced to surrender (the Austrians were losing to the Italians, the Ottomans to the British and the Bulgarians in Macedonia) and were under a dictatorship.

Sources: Hew Strachan The First World War; David Stevenson 1914-1918.

Edit 1: Added a few things and made a grammar check

You have to realize that they planned a huge offensive with all these men, however the offensive was very costly and no real direction. The high command basically said go here and breakthrough the lines with no town or city as an objective. They lost more men during the offensive than any other. They lost almost 600,000 men and were about to draft 18 year olds to fight.

And when the British offensive at Amines commenced the Germans already tired were overwhelmed by these new tactics. They broke through German defense and with American forces alieving other sectors where other Allied troops could go the Germans stood no chance against the Allies anymore. The Germans had no choice but submit to anything the Allies wanted or face even worse conditions like occupation by the allies in the heart of Germany. Wilson the U.S. President at the time wanted a fair deal for Germany and didn't wanted to punish them, he wanted peace. The Allies laughed him off and were going to punish them to the max.