Seller disclosure issue/breach of contract?

My guess is that the furnace isn't vented properly, meaning that your in danger of carbon monoxide poisoning, same goes for the water heater(you didn't say if is electric or gas). It sounds like you didn't pay for a home inspection?? If you did and the inspector left out the furnace and W/H problems, then you have recourse against the inspectors bond/insurance Co. You need to look closely at the sellers discloseure statement(hire a Realtor or R/E lawyer) and see if the seller misled you, it sounds as though your not quite sure of the legal aspects and your problems are too important to mess up by not knowing your rights.