The furnace was only three years old and it turns out it still had a transferrable warranty.

(And then there are other things to do to convert the Tax Sale Deed into a Warranty Deed, but it involves the Abstract (Since Iowa in an Abstract state), and is kind of out of scope for this thread, but it can be done, since I've done it in selling buildable lots.)Yes, absolutely many tax lien's aren't redeemed, and expire worthless. 

Long story short, his contractor license was not valid, there was no written contract, there was no timeline, there were no permits pulled, the list of issues goes on...Once I got involved, I got the project permitted and completed.

Which means, multiple inspections, contractor walks, documentation checks, warranty deeds, etc.

What you're experiencing is very normal for new property ownership, your fears have some validity but it you do have to trust that the systems work property.

They won't tell you because an excuse like "the seller no longer likes the buyer knowing what they've now been informed, or they got more $" isn't a valid reason to terminate the contract.

I have installed and reworked the installation of water heaters before.I don't know, but I am told that the typical 6, 9, and 12 year models at the hardware store either 1) don't differ mechanically at all- they're just building an extended warranty into the price or 2) differ only in the anode rod, which keeps the tank from corroding - the longer-warranty models have a thicker or longer anode rod.If you never ran out of hot water with the one that's there now, then get one the same gallon size. 

Along this, if I were to do it again, any repair over, say, $500 needs to have 3 bids, with specific criteria for contractors (current licenses where needed, insurance, warranties).  

@Nick Shri All three of those options are valid.

You will need to find the original owner to give their title to title company to process warranty deed, if not you may hire a lawyer and proceed with a quiet title which in return will provide you with a clean title, but with quiet titles it takes months to process and you are basically opening a can of worms, because the process allows all pervious owners to be notified weather or not they have interest in the title, deed, property, etc.... if anyone of the pervious owners do, then there might be extra money you will need to provide them to clear title.