Discount for taking entitlement risk, or a long contract with the seller's clock running?

From zero experience, the thing I notice is that option one requires you to be able to eat the building if it doesn't convert. Could you rent it as-is, or sell it at what you paid, or is the downside total? If there's a floor under it, buying at a discount seems like a very different risk than what the word reckless suggests.

@ember is asking the right thing and I'd add the specific version. Is there a rent, any rent, that the building produces in its current use while you entitle? A half occupied office at $9 a foot triple net doesn't make you money, and it covers taxes and insurance while you wait, which turns a burn into a stall. If the answer is zero income, the carry cost of the entitlement period is the real number in the buy-it column and I never see it in these comparisons.

I've done the long contract version twice. Once it worked, once the seller took a backup offer the day my second extension expired and I ate $54k. What I'd do differently is negotiate the right of access for destructive testing into the contract itself, spelled out, with an insurance certificate and a repair obligation attached. Every seller says yes to a walkthrough and then goes quiet when you want to cut the slab in three places. Getting that in writing at signing is the difference between a feasibility period that produces answers and one that produces drawings based on guesses.