I would be just as concerned about why the basement flooded and that it could happen again. If my home, I would call back the inspector for another look. Both the flooding and new sump pump should have been disclosed at closing. Was the furnace fired up by the HVAC tech?

IMO

If there was 10 inches of water then the blower motor may have been partially under water. It may be working now that it is dried out, but there could be long term problems with it.

I would recommend a thorough cleaning of what was flooded. If everything works, I say if it aint broke don't fix it.

Control boards and electric motors can get wet and survive if allowed to dry completely. If the board doesn't work that might be all that needs replaced.

Get a second opinion.

sktn77a - The way the furnace is situated in the crawl space/basement all the electronic components are on the top side (not in the water). Yes, the flooding happened after the inspection (4/28/2017) and before the closing (9/30/2017). The gentleman selling the house passed away, so his only beneficiary (his daughter) came to town and was staying in the house. The daughter apparently told her real estate agent that she replaced the sump pump and there was water in the basement. He didn't question it or tell us. My real estate agent is denying knowing anything about it.

tigerdunes - The house is next to a large lake (between Lake Huron and Lake Erie) in Michigan. There is frequent ground water, and that's is why there is a sump pump. The pump failed, so water filled the crawl space/basement. The crawl space/basement cannot be a living space (it is only about 4 feet high max), and the only thing in the space is the furnace and A/C unit. Floor is poured concrete. Yes, the furnace was fired up and tested by the HVAC guy. He said that due to the humidity not being controlled in the space (i.e., no use of a dehumidifier) the furnace is more rusted out than usual which affects its life span. Being 10 inches under water didn't help either!

mike_home - I agree. It might be ok right at the moment after drying out, but water is not supposed to be in a furnace. Ever!

Vith - After asking the agents about what happened, they agreed to split the cost of having a thorough cleaning and inspection of the furnace today. The HVAC guy that came out said based on what happened he recommends a new furnace, but of course he wants to sell a new furnace. The problem with MI is nothing ever completely "drys out." The general humidity plus it getting flooded doesn't help its life expectancy!

Elmer J Fudd - Had another HVAC guy come out today. He agrees that the flooding of the furnace is not a good thing. Nothing cracked or electrically damaged, but hard to say how many years it took off of the life of it.

I have asked the agent(s) to provide a home warranty for us considering we were not informed of the flooding issue prior to closing. We will see if they are willing to do that for us in an attempt to safeguard us from spending thousands of dollars on a furnace in the near future. Thank you everyone for your responses. I appreciate it.

In my state (California), a flooded basement would be an prime example of damage or other unusual condition that leads to a MANDATORY disclosure from the seller to the buyer. I was looking to buy a vacation home last year and the seller disclosed that a prior owner had died in the property 3 years earlier. Again, a required disclosure because knowledge of that could be important to someone.

You don't want a home warranty policy because the contractors and the equipment one would provide are usually bottom of the barrel.

That there was undisclosed damage is fraud on the part of the seller and negligence on the part of both real estate agents. I would insist the seller pay to provide all new equipment, top to bottom. Why have to guess or take a chance about what was ruined/compromised and what wasn't?

Failing cooperation, I'd sue both agents and the seller. There's no reason to mess with this, who knows what else happened you weren't told about?. A lawsuit threat from a lawyer will get you a resolution pronto. Open and shut case.

Don't feel obligated to be a good guy about this or to be understanding, they were trying to pull a fast one and screw you over. Good luck.

I do agree there should have been disclosure, and feel a reasonable settlement is in order. Whatever the cost to clean up the mess or various damages that happened. If all the components were out of the water they should be fine, just clean what was submerged.

Whether intended or not, lots of dirty hands here and this failure to disclose seems like fraud. I would definitely not accept a third party warranty and would ask for a cash settlement. Your real estate agent should get involved here and advise you. You had a closing attorney?

IMO

Elmer - This house is also a vacation home for us. I agree that whoever knew about the flooding and sump pump replacement should have told us immediately! Thanks for the heads up about the home warranty not being a good choice. I agree that the seller should pay to replace the furnace, and the agents should be held responsible. My agent has been less than helpful through this whole transaction. Shady person. And I do think they've tried to screw us over.

Vith - I agree that SOMEONE should have told us! If nothing else, a settlement for us to put away to pay for when the furnace dies!

tigerdunes - Yes, lots of grimy people in this deal. I was shocked when my husband discovered what had happened AFTER we closed on the property. Thank you for the advice on not to accept the home warranty, but instead get a cash settlement. My real estate agent is pretty much worthless, and I don't trust her at all. She was the only one at closing with my husband (he signed as POA for me since I wasn't able to be at the closing because it was out of state). No attorney at the closing. We didn't find out until the morning after the closing that the basement had flooded. I am calling a real estate attorney today to get some guidance.

The deal is done. Don't expect any help from the real estate agent after the commission has been paid.

This is a tough case. Your attorney can advise you what the law says in situations like yours in your state. The furnace may be the least of your worries. You need to carefully inspect if there any potential mold issues.

I agree with Mike that much more remediation work (cleanup of the entire area) may be needed, not just a replacement of the HVAC equipment. By the way, jprehm, don't stop at just the furnace piece, insist on having it all replaced if there's also an A/C coil there. And when changing the A/C coil, a new matching outdoor condenser may be required too.

I disagree eith Mike's "deal is done, don't expect help from the agent". comment, because either a deliberate action or incompetence has resulted in injury to the buyer for which they are liable. The threat of or an actual lawsuit will get them moving like people in a fire drill, because their insurance or bonding company (assuming they have one) will get involved and try to be conciliatory and avoid a suit asking for a large settlement for damages AND personal injury.

Prior to California's disclosure laws, several decades ago, I bought a house and a known significant (but fixable) problem wasn't disclosed to me. After getting stonewalled by the realtor/spec developer for months, I filed a suit and had the matter very generously resolved in three weeks.

In cases like this, there's no uncertainty of fact to resolve. The problem is obvious, the non-disclosure is obvious, and money for everything needing a fix plus damages (and your attorney costs) would be provided immediately under the law.

Follow the advice of your real estate lawyer, not us amateurs in the peanut gallery, and you'll be fine. Good luck and please report back to let us know how the matter develops.

Since this discussion has turned into a legal discussion which is a California pass time, I wonder about the following. Since no one disclosed this situation to you, how do you know the crawl space was flooded? The repairman says it "appeared" to have been submerged. If you sue, do you really think the agent will "admit" knowing about it. If the seller is charged with fraud, do you think she will admit anything? If you win, how much will a depreciated furnace be valued at? But, its your money. Take the insurance.

Ken, I think you missed the conversation. The buyer found out that the seller had spoken with their agent about water in the basement but nothing was said to the buyer. What I said was that this WOULDN'T happen in California because of mandatory disclosure rules.

What state do you live in where no one ever tries to take advantage of others by misrepresentation or avoiding disclosure of material facts in real estate or other business transactions?

Most states now have disclosure requirements for real estate transactions. In Michigan, it's the Michigan Seller Disclosure Act 92 (1993).

http://www.legislature.mi.gov/documents/mcl/pdf/mcl-act-92-of-1993.pdf

Here is the FIRST item on the list of "Property Condition":

Property conditions, improvements & additional information:

1. Basement/crawl space: Has there been evidence of water?
yes____ no____

If yes, please explain: ____________________________________

You should have received this disclosure. If you did not receive this or if you did and the flooding was not disclosed, then you have some ammunition to threaten someone with a lawsuit (or reporting the agent to their licensing authority). However, as others have said, it'll cost you more to sue that you would ever get back!

Nah, you sue for repair of damages, sometimes injury and sometimes not, PLUS costs. Costs includes lawyer fees. They're normally awarded because if the seller hadn't been a scumbag, the legal action wouldn't have been required.

At the risk of having this thread become a long legal debate I am going to add my comments.

First go back and read the original poster's two posts very carefully and try to separate actual facts and hearsay evidence.

The furnace is in a 4 foot high crawl space. So I would think it is installed in a horizontal position. So even a few inches of water can cause a lot of damage. The tech estimated the water line reached 10 inches. Whether it was 1 or 48 inches the fact it is in a horizontal position makes it a lot worse. A few years ago I had about an one inch of water in my basement and lots of things were ruined except the furnaces because they are in a vertical position. I ended having to replace sheet rock in the finished area and replacing a carpet. But the furnaces are fine.

The furnaces may have been flooded prior to this latest episode. The seller who did not live there may not have known.

Now the interesting legal question is if the seller made an honest disclosure at the time the contract was signed, is he obligated to disclose anything between the time of the inspection (April 28), and the day of the closing (September 30)? That is a 5 month period where things can break and natural events happen. The seller is usually allowed a final walk through just prior to closing. If something really bad happened, like a flood, the seller may or may not see it.

I hope the OP keeps us posted on this. This is an interesting one.