I know because I have one of my appraisers do appraisals on some of my high value homes in order to sell the house at a "discount."

I don't see how building a fourplex would be any different (at a high level), assuming you have an experienced builder lined up to do the construction. 

The price was too high, initially wanted to combine the units to make a duplex.

I think it will have a more profound impact than the internet.

I would do absolutely nothing.There is no reason to compete with stupidity as it will weed itself out.If one property comes to market at $400-$500 cheaper than actual market rents ONE lucky person will get that property and one foolish landlord will be losing a LOT of money.This would literally have zero impact on my ability to rent my place and I wouldn't for one second allow it to influence my pricing strategy.

We decided to fight the charges and file a case in small claims court (not knowing the future impact of a dinged credit).

It was actually under contract with a contingent offer for months, so I suspected something may be up because at the time the velocity of transactions was insanely high in my area and closing times were as low as a week.

That seems high, but there are people who will pay that. 

Will you be able to buy another property with the proceeds at the current high-interest rates and will it be profitable?

I like to provide the fix and flip opportunities to local investors, and the stabilized cash flowing rental units to both local and out of state investors who are looking to add this type of product to their portfolios, as there are several, high quality full-service property management companies in the area.