First was an amendment (not an addendum or counter-offer!)

A counter offer is considered a rejection of the initial offer and cannot be accepted. 

And if an unacceptable offer is written and presented to me, in absence of specific instructions to not present impossible offers, I'm either going to advise my client to counter offer the buyer with an amount the bank will accept or I'll advise them to reject the offer. 

Anything other than an acceptance or counter offer is a sign that pursuing this property with anything more than an occasional follow up will be time wasted.The number one reason new real property investors quit early on is that they spend all their time and energy chasing undoable deals.

Why don’t you counter offer for an extra $2500 to try an break even.

Your grandparents can counter offer at a higher price, or they can say that they are accepting offers for 2 weeks before deciding on one, and have that open house in that time. 

I am making an offer to a SFR in Texas with $100 option fee and got a counter offer with $350.I read some past posts regarding this, and it looks like norm here is $100-200.This is my first rental property, and I would appreciate any suggestion,  comments on it!

The seller has counter offer so now it's up to me to accept it or not.

To calculate each category we applied the ratio of land/building provided by the city assessor to the price in our counter offer.  

(PS ALWAYS GET ANY COUNTEROFFERS IN WRITING!)