I'd say you need to look at your own desires first.
If you simply want the best deal possible, stay at your current offer. If they are desperate to move and yours is the only offer thus far, they will likely revise their offer to something lower. With this strategy, there is a chance you may lose if another party sees the house and wants the place badly, but it guarantees you the best deal.
If you are very interested and don't want to lose this house, increase your offer (slightly), say to $93-94/sq. ft. Then see what they come back with. If they stay put, you'll likely have to go with the $96/sq. ft after all. This will indicate that you are quite interested, and the buyer will likely either go with your offer or give you the opportunity to counter-offer, should another bid appear.