Trading Leaseback Time On Sale For Extended Contract Time

[Bryan Hancock]

We have a small development project tied up in Austin right now that the seller negotiated pretty hard pre-MLS. This is in one of the hottest areas of the country right now in central Austin.

Our play is to scrape the existing structure off the lots (plural) and build 4 units there instead. We've been reluctant to negotiate the deal like a land purchase because from the seller's perspective he is thinking he is selling us a house to live in and we don't want to alert him to the fact we'll be demolishing the house for fear of possible emotional backlash.

Right now I have 45 days to close the project. We have the $660k or so needed to fund the equity for the project lined up, but we're trying to extend the deal if possible to limit city risk. We have a 10-day option and will have $5500 in earnest funds at risk past day 10. The bulk of the risk is with the purchase of the land though.

The seller has expressed interest in a leaseback when we presented him with this option. I am trying to think of creative ways to get more time on the contract to limit city permitting risk without him being alarmed that his house will be demolished after the sale. I was thinking of offering to allow him to get one day of leaseback post closing for every extra day he gives us to close past day 45. Can anyone think of a better way to structure the trade to get more time on the contract?

He doesn't seem motivated to close quickly and I think he really just negotiated a short closing to keep from having his property tied up during the peak sale season. Allowing him to get value out of the contract extension by offering some rent in trade seems reasonable. We're unlikely to get a quality renter for 6 months and 6 months is really too long anyway given that we'd probably start build around month 3 or 4 after the purchase.

Ideas?