As I explained to them, between acquisition costs (their home alone is worth 500K on the market, not including the lot next door), permits, fees, holding costs, the cost of tearing down their perfectly good home, and then adding in the cost to build 4 new units it just doesn't seem like it would pencil out.

Wait until they show up with contract in hand, otherwise take the free publicity of the property.Just my 2 cents and not legal advice.

Generally speaking all parties with an interest in the property have to either agree on what to do or take legal action to force things to happen.

Fortunately, one of my partners in that venture is a lawyer and she helped figure out the legal ramifications. 

I was told Legal Zoom could, however since my LLC has already been opened.

Its zoned as a single family home and has everything necessary to be a legal accessory as far as the city goes, but there are a few problems with the HOA.This is what the HOA has to say about renting out part of the home. 

This house flooded in Katrina (2005), but I think it sat vacant for a few years because the first permits were pulled in 2009. 

Check with the local building department to find out whether there are outstanding permits for any work that was done on the house. 

In our area a/c permit now needs a leakage test witnessed by City inspector. 80% of homes built since 1970s here do not pass leakage test.

For your small rehabs how do you find as well as oversee contractors as well as dealing with local permits & laws?