Offer rejected, now what?

I made an offer on a house recently and it was rejected. In all fairness, the offer I made was a bit on the low side (20% below asking) but the place needs lots of work starting with a new septic system and the kitchen needs a complete overhaul. It is very outdated. The sellers didn't outright reject my offer but dropped their asking price by only 2%. What would be the best way to proceed at this time?