So...how low CAN the owners go and how low WILL they go. They can (it appears) go lower than your "afford" price. If they need to sell - they might. If they don't care - probably not.
How good a buyer are you? Do you have your 'ducks in a row' so that your ability to perform on any accepted offer won't be questioned?
If you have already seen this house with an agent why don't you trust their advice? (If they are the listing agent - you have good reason not to.) If you don't have an agent make sure you get one willing to do the research necessary to evaluate the condition of the property and the sales and tax history, whether it is in a flood zone etc, BEFORE you make an offer. MAKE SURE they will not end up showing you homes listed by the company they represent.