Last weekend I bought an '89 Centurion Le Mans with mostly-intact Shimano Exage group on SF Craigslist for $40. It is potentially my first flip. It is in rough shape & will get a complete overhaul plus around $60-$70 in replacement parts: handlebars (goofy straight bar setup with broken thumb shifters back to drops) handlebar tape, new cables, levers, new saddle, etc. Paint has some nicks and decals are in poor condition. I don't plan to do much to the frame but give it a thorough cleaning, scratch/polish treatment & wax. I've been debating an asking price for the fully-rehabbed bike and was thinking of around $250, and would be happy with $200.
So, yes, I agree that $400 is excessive, even for the SF bay area. In most cases, people buy used bikes on CL to save $. I believe there's a sweet spot in the $200-$300 range for good condition commuter/student bikes. Above that and your average Joe/Jane is more likely to buy a new entry level bike at the LBS for around $500. I've never sold a bike, so this is mostly conjecture and observation from spending WAY too much time perusing CL for things I do not need.
