Received Counter offer on home, not sure what to expect

First time buying a home, found one I really like and we put in an offer 5k over asking (330k -> 335k) but asked for 2% toward closing costs. The house itself has been on the market for 42 days now and the first buyer fell through after losing interest. I went and toured with my realtor and looks like the Seller is just about done packing and moving out, but I don't want to assume their situation.

The counter offer they proposed was still 335k but only 1% toward closing costs and .5% off my agent's commission from 3% to 2.5%. We countered again with the original offer as I felt we offered what I felt was a very fair offer and with the VA loan structure and lenders credit I did not want to concede closing cost or commission percentage points.

Do you think the seller will continue to negotiate and accept the offer or outright reject it? It seems like a small amount to walk away over but at the same time I can see how the seller could say the same thing in hopes we would accept the counter offer.

Thanks in advance! Hoping for the best as it is an awesome home!