So our hopes at reconsideration based on on the historical permit records are slim to none.So it looks like our only move here is to prove that the coach house has been existing as residential for at least 20 years and get an administrative adjustment. 

Since your last residency was in 2020, you do not meet this requirement, so the exclusion likely won’t apply.You'll need to calculate the capital gains based on the difference between the sale price and your adjusted cost basis (original purchase price plus improvements and less depreciation taken).

I'd recommend adding those as they'll adjust your returns.  

I could model what held-for-sale properties would potentially sell for and on a weekly basis adjust our model parameters based on what winning bids were for the week.

This market is extremely tight and you might have to adjust your math to make things worse. 

I imagine the latter would help conserve water usage, but the prior is easier and some tenants don't want to pay for hot water but they could run up the bills at my expense and I'd have to wait 1yr to adjust usage.

The vast majority of states also leverage figures on a federal return as a starting point to define taxable income, making adjustments to those figures to arrive at the portions of income that are taxable for state tax purposes. 

Increased Buyer Interest: When prices are adjusted to more realistic levels, properties become more attractive to potential buyers, leading to increased interest and potentially faster sales.3.

Remind them of the peace of mind you offer by ensuring the deal won’t fall through and that you handle all the details.With a few adjustments, your approach can be even more effective in converting leads to deals.

Perhaps you could discuss this with them and they may decide to adjust the charge.