Jimmy,The key thing to note here is that they have high limits on their Insurance for Liability.  

See the table below which compares what is on an MLS data sheet and what an investor needs to evaluate a property.Below is a high-level summary of the tasks an investor needs to accomplish.

Overall the real estate market is still appreciating despite the high rates, albeit slowly.

Great strategy that should be highly considered in my humble opinion. 

Example: If there are too many STRs and you can't get the occupancy high enough then you could switch into MTR. 

I have about $250k in equity in the home and my realtor believes if we list it we will probably get a bidding war in this market and since our neighborhood is highly desirable.

Two high level quotes come to mind "Let your winners ride" and "a great value asset at a fair price is much better than a fair value asset at a great price".

My agent over valued and listed high.

What options would I have as an exit strategy to get out of paying this high amount?

Hey Seth, If you have a good FICO, Loan Amount is above $250k, and property DSCRs at 1.25, You may achieve a rate at the high 7s at 70LTV on a 30 year fixed loan.