The -R flag on chroot, runs everything inside a chroot environment, it says the user does not exist because it is looking for the passwd file inside /home/user4/etc/ which probably does not exist.
The command you want is probably
sudo usermod -d /home/user4 user4 to change the home directory.
To enforce a sandboxed environment where the user see’s /home/user4 as their own root path is not managed by the passwd file or usermod command.
Some more information here.