The only way to combat this is with a much lower purchase price, where your high cap rate and low basis can overpower the financing disadvantage, or with some type of supplemental financing.  

To combat this with either index you can ask the bank if they have adjustment caps. 

Alternatively, are there any other strategies I may be missing that could be helpful in combating all cash offers outside of HELOC to delay financing?

It isn't so much that lawyers abuse the process, it is that people on the other end of the process aren't necessarily familiar with how to combat misuse of the process.

@Michael Hicks I honestly wasn't referring to you so I apologize if I was coming off snide/combative.

The house next door just got sold for 265 (asking 279K) same issues with drainage but the owners were very diligent in combating the problem and installing french drains around the entire house.

If you keep a consistent $5k in reserves due to your estimates today, you'd be scrambling to come up with an extra $1,400 in the future.How do you combat this?

I have taken over villages and towns from enemy forces whenever I was deployed in combat so my new goal is to take over the world (not in a pinky and the brain kind of way).

How do we combat this kind of thinking?  

The small landlord, in my opinion, does not have the resources to combat these in a major way and is not in the right position to handle them--lack the resources, program and training.