A couple years ago I met a guy that had a cottage (worth $800k) on a 10k sq ft lot. He wasn't looking to sell at the time, but was renting the place. Found out the property was zoned multi-residential so I decided to offer him $1M, thinking he would jump at the chance. He countered with $3.5M. He wanted the price as if the new multi-units were already built on the property and ready to sell. Greedy ass people in S.F. with no common sense.
LOL, it is you who was being unreasonable, offering him only 200k for the optionality to tear down and build multi-unit. You low-balled him, he high-balled you. That's how it works. The time when negotiations are complete is when both parties are in equal state of pain. PS. Anyway, a 7k empty lot in Manhattan would easily sell for 3x of that.