The third offer was magical, once you got a second offer from an applicant (buyer) you could bet they'd come back with a third and you'd get a deal. It is a good rule of thumb.
If I HAD to buy somewhere now I'd still sit on my (your) original offer. There's plenty on teh market so the vendor is competing for buyers which is a welcome change from most of teh last 15 years. My only other advice would be to take a look at some property auctions as these tend to be cheaper.
CAVEAT: do lots of research, auctions can be tricky and you'll need finance in place, though most poeple will sell only to cash. Thesew days however I think they'll sell to anyone who will pay.
Going back to your current interest, they've dropped from 260K to 225K whih is of course 13.5% down and roughly inline with what many indices are quoting as the rate of decline. If he's had very little interest I would suggest it was over priced to start with.
One other trick in teh estate agents arsenal was to use more psychology that of the £250K stampo duty barrier, to force offers at 250k. if it's worth 230k, why not have a go at marketing it for 260k, if someone gets it for 250k not only do they think they've got £10K off the asking price but they've saved another £5k on stamp duty. My gut feeling (and I stress it's difficult for me to be certain without seeing the property) is that it was already overpriced, in any case your vendor would have been made aware by the agent that he would only get £250k because the SD rate jumps from 1% to 3%.
If we take 250/225 we find the reduction is only 10%. I was more than generous earlier by saying 13.5% was roughly inline with falls, I personally think they are higher than this, and the rate of decline may fall, but prices are still falling. The vendor wants to maximise the sale price (as will you when you come to sell it) so his current asking price is not pricing in further falls. You current offer of 9% below I think is more than genours, the problem you have is convincing the vendor to take the offer and with all this nonsense about our economy magically rising from its deepening grave wont help, but I'm expecting big problems in housing for years to come, the main problem goping a year or two ahead is the cost of borrowing and rising unemployment. The US and the UK govts are really pushing their credit staus to the limits and as more and more debt is issued they will find it tougher to borrow, so rates on these will rise as investors feel they are more risky, and rates will rise also to attratc othger investors who seek higher retuirns elsewhere. And for every extra pound the gov borrows, that's one less pound availabe to be lent elsewhere (assuming a fixed money supply - it's expanding through quantitative easing by £125bn thsi year, gov borrowing will hit £220bn so they're sucking it out of the economy). This means higher rate for mortgages too as whatever happens in the world governments are still deemed less risky than individuals.
Enough of the economics! THe only thing I can suggest you do is try and persuage teh estate agent to run around and try to find him something else to move into. If he's seriosu abotu moving then he should be actively looking even if he has an 'unacceptable' offer on teh table. In my experience the moment they fall in love with somehwere is teh day they try and come back for a higher offer (maybe give em a couple more grand) or they'll probably reluctantly take what you've left on the table for them.
Best of luck, and if you have any other questions please post back.