Flood Plain

[QB2025]

Hello everyone,

I’m dealing with a property in Atlanta that is zoned Mixed Use but is mapped by FEMA as being almost entirely in an AE flood zone. An appraiser I spoke with said that because of the floodplain designation, he would discount the underlying land value by 80–90%, even though mixed use would normally carry much higher value in this location. He mentioned the valuation might only be $10k–$20k per acre, when similar non-floodplain comps are closer to $100k+ per acre.


I have a few questions I’d appreciate professional insight on:

1. How is such a steep discount determined in practice? Is there a standard methodology appraisers use, or is it more of a market perception adjustment?


2. Does a floodplain designation make property essentially “worthless” for appraisal purposes, or is there still significant underlying value if zoning and location are strong?


3. Would commissioning a new survey (and possibly a LOMA to amend FEMA maps) help remove or reduce the discount? FEMA flood maps are sometimes outdated, and I’ve heard they are supposed to be updated on a 5-year cycle.


4. If part of the land is still developable (outside the flood hazard), how should that be reflected in valuation?


I’m trying to decide whether it’s worth paying for a full survey now to challenge the FEMA designation, or if that should come later in the process.


Any guidance from those of you experienced with floodplain property appraisals would be extremely helpful.

Thank you!

 

[Terrel L. Shields]

1. How is such a steep discount determined in practice?

Hunt for other sales in flood zones of vacant land and see what discount that commanded. If you have to go back 10 years even, find a few sales and estimate the percentage discount from those, apply it to the subject. Estimate the land value of each comp and adjust dollar for dollar to the adjusted subject value.

 

[KHS445]

First of the AE designation is for areas with a slightly less than 1% chance to flood on an annual basis and an approximately 26% chance of flooding once over the life of a 30 year mortgage. Second the AE designation comes with an indicated elevation, with anything above that level being “safe from flooding”. You can build in an AE area, you just need to adhere to certain controls regarding foundation and living area elevations.

The level of discount thrown out by the appraiser you talked with may or may not be correct. All real estate is local and in my opinion his comments are worth what you paid for them. Because of the mixed use zoning designation I would contact a Certified General Appraiser and ask what they would charge to consult with you regarding the AE flood zone. Probably cost a couple of hundred dollars, but would answer your questions and cost a lot less than a full appraisal. Depending on the availability of similar size and located property the cost to meet the flood zone building requirements may be minimal compared to the value of the property.

 

[QB2025]

First of the AE designation is for areas with a slightly less than 1% chance to flood on an annual basis and an approximately 26% chance of flooding once over the life of a 30 year mortgage. Second the AE designation comes with an indicated elevation, with anything above that level being “safe from flooding”. You can build in an AE area, you just need to adhere to certain controls regarding foundation and living area elevations.

The level of discount thrown out by the appraiser you talked with may or may not be correct. All real estate is local and in my opinion his comments are worth what you paid for them. Because of the mixed use zoning designation I would contact a Certified General Appraiser and ask what they would charge to consult with you regarding the AE flood zone. Probably cost a couple of hundred dollars, but would answer your questions and cost a lot less than a full appraisal. Depending on the availability of similar size and located property the cost to meet the flood zone building requirements may be minimal compared to the value of the property.

Thank you . Just a few follow up questions.

1. Discount Determination

• “For AE flood zone land, what percentage discount is actually supported by market sales in metro Atlanta? I’ve seen one appraiser suggest 80–90%, but comps across the street from my parcel only reflected ~50%. Is there a reliable range or does it vary case by case?”

2. Role of Elevation & Buildability

• “Since AE zones come with a base flood elevation (BFE), if a parcel can be developed with fill/engineering to build above the BFE, should the discount still be as steep? Or does that preserve much of the land’s value?”

3. Market vs. Cost Impact

• “Is the discount supposed to reflect the cost to mitigate (engineering, raised foundations, stormwater work), or does the market usually penalize AE land beyond just those costs?

4. Appraisal Practice

• “When doing land appraisals in flood zones, do you always adjust from flood-zone comps only, or can you use non-flood comps with an adjustment? How is that adjustment quantified in practice?”

5. Survey / FEMA Maps

• “If FEMA maps are outdated, and a new survey shows part of the property can be removed from AE with a LOMA/LOMR, does that typically restore value right away? Or do buyers/developers still discount it heavily regardless?”

6. Mixed-Use Zoning

• “How does having mixed-use zoning (as opposed to purely residential) influence the impact of an AE designation? Would developers still consider it viable if retail/parking could be placed on lower areas and housing built higher?”

7. Worthless vs. Discounted

• “Is AE land ever considered worthless for appraisal purposes, or is it always a matter of how much discount is supported by comps? Has anyone seen land appraised at near-zero just for being in AE?”

 

[QB2025]

Hunt for other sales in flood zones of vacant land and see what discount that commanded. If you have to go back 10 years even, find a few sales and estimate the percentage discount from those, apply it to the subject. Estimate the land value of each comp and adjust dollar for dollar to the adjusted subject value.
First of the AE designation is for areas with a slightly less than 1% chance to flood on an annual basis and an approximately 26% chance of flooding once over the life of a 30 year mortgage. Second the AE designation comes with an indicated elevation, with anything above that level being “safe from flooding”. You can build in an AE area, you just need to adhere to certain controls regarding foundation and living area elevations.

Thank you . Just a few follow up questions.

1. Discount Determination

• “For AE flood zone land, what percentage discount is actually supported by market sales in metro Atlanta? I’ve seen one appraiser suggest 80–90%, but comps across the street from my parcel only reflected ~50%. Is there a reliable range or does it vary case by case?”

2. Role of Elevation & Buildability

• “Since AE zones come with a base flood elevation (BFE), if a parcel can be developed with fill/engineering to build above the BFE, should the discount still be as steep? Or does that preserve much of the land’s value?”

3. Market vs. Cost Impact

• “Is the discount supposed to reflect the cost to mitigate (engineering, raised foundations, stormwater work), or does the market usually penalize AE land beyond just those costs?

4. Appraisal Practice

• “When doing land appraisals in flood zones, do you always adjust from flood-zone comps only, or can you use non-flood comps with an adjustment? How is that adjustment quantified in practice?”

5. Survey / FEMA Maps

• “If FEMA maps are outdated, and a new survey shows part of the property can be removed from AE with a LOMA/LOMR, does that typically restore value right away? Or do buyers/developers still discount it heavily regardless?”

6. Mixed-Use Zoning

• “How does having mixed-use zoning (as opposed to purely residential) influence the impact of an AE designation? Would developers still consider it viable if retail/parking could be placed on lower areas and housing built higher?”

7. Worthless vs. Discounted

• “Is AE land ever considered worthless for appraisal purposes, or is it always a matter of how much discount is supported by comps? Has anyone seen land appraised at near-zero just for being in AE?”

 

[Terrel L. Shields]

comps across the street from my parcel only reflected ~50%.

I would weight that as most appropriate

do you always adjust from flood-zone comps only, or can you use non-flood comps with an adjustment?

Cannot think of a time I had 3 comps in a flood zone similar to the subject

“If FEMA maps are outdated, and a new survey shows part of the property can be removed from AE with a LOMA/LOMR, does that typically restore value right away?

It should. I've seen that. And I've seen the opposite where a survey showed the flood zone touched a building foundation on one corner. The owners of the building was a loan officer himself and his co-owner a retired banker. They were borrowing from a sister bank and did not hire me.

“Is the discount supposed to reflect the cost to mitigate

It can if the buildup is minimal, but it simply reflects buyer sentiment. The cost of flood insurance can be capitalized to make an adjustment as well.