Hard to say since real estate is local.
Is anything selling there?
If things are selling, are low offers common?

Chances are someone will come in and low ball, siding issue while you're saying $3-4k, the buyer might think $10.

I would not wait to list a house. Is there a summer market where you are?

I'd go ahead and list it, regardless. Siding is for the whole house? That does sound like a low estimate if so.
We just had Sears install 850 sq ft of vinyl siding, and we went with the "middle" grade. It was $7,000 after the discounts, and that was only the (very large) gables of the house, and included two gable window vents as well. Without them, it probably would have been more like $5500.00

Personally, it wouldn't put me off if the inside has been done, to know that the outside is all that needs work. And, if you go too cheap, it might show. We're selling a wood house, and people coming to look have actually peeled paint off trying to see what the wood underneath looks like. It's cypress, and it's as if they don't believe us! So, if you do spend the money on the cheap, savvy buyers or realtors might be able to tell.

Southernstitcher, did you get other estimates for siding other then Sears? When we got siding we got an estimate from them and they were much more expensive then any other estimate. I later heard this from other people.

I would wait to list it. It will cost you $4000 to reside, but a Buyer will deduct $10,000 in the offer, if any is presented at all. Most buyers will narrow down their search via the internet... and when they see that cheap T - 111, they most likely will click to the next listing.
Another point to consider... when ever I see a house that is half way rehabbed, I know there is a good chance that the Sellers are out of funds. this is something that you do not want to advertise to Buyers! They will take advantage of knowing this.
Even if you lower the price to reflect the $4000 needed to reside, Buyers will still come in expecting a much larger discount.

Thanks for all the replies.

roselvr - Yes, houses are moving here. There was no "bubble" and though the real estate mark has slowed, home values have held. Anything that is sitting on the market now is either overpriced or a dump. Yes, there is a "summer market" as it is in a lake community in PA. Our realtor said that would like to see in get on the market by the end of June.

southernstitcher - Yes the price we got it about right. It is about $1200 for the siding, and $2000 for the labor. We would do it ourselves but I can't do heights, and it is a split foyer, and the lot drops off in the back.

I asked our Realtors about siding, and they said to save our money and NOT do it. They said the T-111 is fine. There are a lot of houses in the community that have T-111. It comes from there being a lot of vacation homes here.

Yes I agree they are expensive! They were the first estimate we got, and the two salesmen they sent here simply wore us out. And my husband is a big Sears fan, thinking they really live up to their warranty. He didn't want to wait anymore, and said he couldn't find anyone.
Well after we went with Sears, we attended a Home Expo, and there were some siding businesses there. I was really upset at the amount they charged. Of course, they had to pay these two old geezers for their two hour round trip and their 4 hour torture session in my house, plus commission!