have you check this post before you offered?
http://www.m3post.com/forums/showthread.php?t=366319
Remember your car is now 2 years old going on 3 in about 6 months. Plus I think 32k miles is a bit high for that price. I would price the car at $42.5-$43.5k for straight cash purchase. (I.E. if your trade is really worth $33k and he's only giving you $32k, then the lost $1k needs to sum up to the $42.5k-$43.5k offer) Personally, I wouldn't trade, it creates too many moving pieces to figure your true cost. (imagine other ppl doing trades + financing, many moving pieces!) I would sell it privately.
Also, if you're not hot for gray colored cars, I feel like you may be overpaying, I think gray is a "premium" color that other ppl are willing to pay up for than the standard black, silver, and white. Last thing to note is, every seller has a different cost structure, if he turns you down, it doesn't mean you're offering below market price, it might mean his cost is above market price already (sucks for him), you need to keep offering a similar price adjusted for each car thereafter.
I feel like well above 60% of all ppl who purchased used M3s are overpaying based on above thread. They're "too excited" about the fact they'll be getting into an M3 that they throw an extra $5k (combination of bad financing terms or getting killed on the trade) away just to get it this week.. blah.
I made an offer to that dealer before for a E90 M3, they're always on the high side of the counteroffer, maybe the market is hot up in Minnesota and they feel like they can unload it at $50k? Ridiculous nevertheless, if you're reading this and bought something similar, than sorry, but you overpaid.