When listing a property we are limited to the means our sellers have and make available, it is their choice to withhold some information if legally allowed to do such, that's life and business, and it happens every day.

Why did they withhold $500 without evidence of tenant responsibility?

There are documents that normally third parties will ask you about your 'status'If you work with a property management company, theoretically, they are suppose to withhold money on your behalf which trigues you having to file a return.You may be required to file a 1040NR which is different than the 1040 form that Citizens / Residents file.

Section 8 visits to nit pick small repairs and with hold rental payments for 2 months6.

Then I’d… list the place immediately as discussed and if your lease and the law allows, you may be able to withhold the security deposit. 

Here is the citation for those who want to do their own homework:California FTB NOTICE - 2019 - 05SUBJECT: Imposing the Failure to Withhold Penalty Against Qualified IntermediariesWho Actively Participate in Certain Improper Like-Kind Exchange Transactions

Hi Jordan,A business partner of mine is working on a calculator that estimates the costs associated with holding a property, based on constantly updated real world data. 

and is there a way to avoid the withholding requirement?

Is it common to withhold retention from the general contractor payments until lean release is obtained from the sub performing the work?  

If you withhold significant info from the Appraiser which will impact the Appraisal, then the Appraiser is justified in asking for a fee increase to redo the research.- PROVIDING AN APPRAISAL PACKET TO THE APPRAISER AT AN INSPECTION IS TOO LATE !