Making an offer if paying cash

[Digger Odell]

Looking at buying a home to live in. Odd property in that was a commercial building made residential on the inside. Still looks very commercial from the street among conventional homes all around. 

Only been on the market a week and a half. Paying cash. Selling asking $235, offered $200. They said "no, will wait for the $235"

My agent says any other buyer will not be able to get certain kinds of loans for this place and it has a face only a mother could love. What should I do. Are they really saying nothing less than asking price or is it worth going back with another offer and what do you think is fair.