Home Inspection Problem

[Nicholas James]

Okay so we have a bit of an issue. We are buying a property As-Is with right to terminate. At the beginning of the 3+ hour inspection the washer was started. Days later we found out the washer flooded (not seen during the inspection even with being in the area) as it was stuck on the rinse cycle and overflowed. It caused drywall damage to the area around it and the basement below (seems relatively minor).

The sellers are freaking out (due to their real estate agent being super crazy about it) and they got a lawyer (the contract says any damage caused by buyers or buyers inspectors is their fault). Any advise? We still want the property and it seems to be the fault of a broken appliance not the inspector (as it should have been obvious while we were there for 3 hours). How do we reason with the sellers when they have an awful agent?

Thank you for advise!