Your state law is certainly different from mine. VA also allows AS IS sales by dealers.
Sales between private individuals are buyer beware. I have always had a mechanic look at a used vehicle before purchase - that is the responsibility of the buyer, not the seller. The car before last that we purchased for my mother, I had 5 cars checked out by a mechanic before we settled on the one that we purchased.
But, even according to your laws, as long as you were not aware of the problem, you are not responsible. And you are certainly not responsible for the repairs/improvements that they made.
Case in point, my GF sold a 95 Celica that she had purchased new. It had been well maintained and had about 130K miles on it. The kid that bought it blew all 4 cylinders after about 3 weeks.
He had the car looked at a Toyota dealer before the purchase and it obviously checked out. He abused it and destroyed it. When my GF found out, she felt really bad and started to feel responsible. Her son and I had to explain the obvious abuse to her. Had one cylinder blown, that could have possibly been attributed to pre-existing, but all four?
To further show innocence, neither her son or myself wanted her to get rid of the car, but she just had to have that brand new PT Cruiser.