I have offered and counter offered and we are at a stalemate.

She told you should give me counter offer, and she ok with full price and begged me to get the lot.

We are new investors, just starting out.  We were pre approved for a commercial loan, but should we try for conventional? Or something else?  We paid off the conventional loan on our primary residence a few years ago,...

That’s fine, you’re looking to turn a profit, not every owner will give you a counter offer you so you just keep it moving.

And also what a good counter offer to the third floor would be for us?

The more time on market and the more REO properties the lender already has on their books, the more likely they are to consider "lowball" offers.However, one thing that generally comes out of offers on bank foreclosures is, you will generally get a counteroffer - so at least you know what their real number is.

As long as no other buyer offers more they will send you a counter offer.

So he drew up a counter offer and had me sign it. 

After a couple of rounds of counter offers we agreed on a price and I decided to walk thru the property for a second time.

Since the counter offer was verbal, I very seriously doubt the seller can be held to it.