The land owned by somebody else was not sold at tax sale only the former improvement.I saw a property sold at tax sale that was at the bottom of a man made lake.I saw a property sold multiple times at tax sale that was a bombing range for the Army.I saw a country house sell at tax sale that was a gas station site in the 1930s and still had leaking under ground tanks on the property, and there was an existing lawsuit by a neighbor claiming health damage and birth defects from gasoline tainted wells.I saw a property sell at tax sale that was five acres with road frontage except the road frontage was a fifty foot cliff.I saw a property sell at tax sale that was 2 ft wide, residual from a highway expansion project that took the rest of the property.Properties have sold at tax sale that were no existent due to mapping error, title errors, surveying errors, or some other issue. 

Chances are it is simply a dead element or defective thermostat...easy and fast fix to simply swap out unit.The biggest issue with new appliances is the electronic circuit boards.

And I wasn't going to tell the painter to paint the house without replacing all of the rotting wood (which, again, was part of the original contract), because then I would have ended up with a defective job.

@Jonathan White Seems to me that unless the defective septic was disclosed in the listing (as you said, it wasn't), you had every reason to think that the property was being delivered with a properly functioning system.  

That being said, I wouldn't go crazy on the punch but just point out the major areas of defect. 

@Cara Lonsdale  I understand your city has buying services I am on their e mail chains.. and a few others but that is a Rarity.. plus your putting a lot of faith in someone making 2 to 3k as a buying service why you spend 100 to 200k and have all the risk of bad title or other defects..don't get me wrong I love trustee sales its fun exciting and there can be some good money there especially buy and hold.. but its WORK to do it right.. and most folks especially someone like this OP who is asking what to do .. that inference means not a lot of experience in the real estate space..  

@Renae PinkneyI'm an engineer so have a brain defect but one of the biggest realizations about myself that I made was that I often lacked the ability to take the 'first step' because I would continually be thinking / analyzing etc. 

And when the material is wrong/cracked/defective whatever.... be ready to fix that yourself.

There is no apparent “defect” that they didn’t disclose, if that’s where you’re trying to go with this, just an inspector’s opinion.

Buying a 10k house is difficult to make work, even in the cheapest of markets it will likely take $30,000+ worth of work to make it worth living in and can be in less than ideal areas with hidden defects to boot.