You should seek out and speak with a financial planner/estate attorney.

I just found out the property is in a Zone A flood area, which means lower property values and a longer selling timeline.At this point, I’d rather take the $5K loss than deal with the potential headaches.

That's a $40,000 loss per year after buying it for $800,000 below asking price and before accounting for maintenance, vacancies, capex, etc.Here's a guide that describes what good cash flow looks like and how to analyze a property.https://www.biggerpockets.com/blog/rental-property-cash-flow...

You use the depreciation losses from Property B to offset the depreciation recapture & capital gains from the sale of Property A. 

However, if the depreciation deductions create a net loss, this can offset other taxable income.To fully defer taxes, you’d need to reinvest both the full sales proceeds and match or exceed the prior debt level.

With more rentals it becomes less likely that a loss will wipe you out.

I can release my properties without much loss if I have to. 

If it’s doable financially I’d recommend the duplex.

You might consider: Consulting a Real Estate Attorney – Your emails may possibly prove misrepresentation.Requesting Public Records – A FOIA request might reveal why the city denied you but later approved the duplex.Escalating to City Officials – Bringing this to local officials could expose inconsistencies.Exploring Tax Write-Offs – A CPA might help offset your financial loss, if it is possible.I’d definitely seek legal advice.

What would you say is the leading cause of the loss of capital of the people/funds you mentioned?