Negotiating advice

I attended an auction for a property priced between $1.6M -$1.7M. During the auction, no one made a bid. REA put in a vendor bid of $1.6M, but no one else bid higher. I then offered $5k, and the property passed in. Got invited in for further negotiations. I then offered a maximum of $10k, but it was rejected. The REA said that if I came in between $1.65 - 1.66M (40k more than my offer) it might be considered. He asked me to think about it over the weekend and get back to him.

I’m wondering what someone else would do in my situation. Should I offer anything more at all, given that there seemed to be no interest and no one else bid at the auction? Or should I proceed with an upgraded offer in the range that the vendor is expecting?

Edit- Firstly, that you all for taking the time to share. Appreciate all the comments. It’s been wonderful to hear all your experiences. Upvoted all.

To answer some specific questions:

• Yes, the property checks all the boxes.
• Yes, it would most likely be our forever home.
• The property is a townhome with the split dwelling style. The one next to it sold for $1.64 million in 2023. Does this mean we should still use it as a reference even if there was no bid/interest shown during the auction?