How to deal with a sketchy seller?

[Loren Jacobs]

I walked through an off market property recently.  Before walking through the home I always ask some preliminary questions about the state of the property such as previous or existing problems, I always ask specifically about water problems.  The seller said there hadn't been any and were not currently any problems.  During the walk though I found several old signs of previous problems that seemed to have been "fixed" (old leaking drain lines and frozen water lines, etc..).  The seller conveniently remembered them when I pointed them out and mentioned they were no big deal.  We also ran across existing water damage in the basement, wet and moldy carpet, baseboards, etc.. I asked the seller about these issues and he denied having any prior knowledge.  I mentioned that I would like an inspection performed to see if the water damage was a simple landscaping problem or something structural.  The seller would not agree to having the property inspected or letting my contractor look at the property until after he had a chance to repair the carpet and baseboards, even after I suggested otherwise.  He clearly is not disclosing everything and is trying to cover up blatant problems.

Has any dealt with sellers like this before?  What is the best way to handle the situation? 

Thanks for your advice.