My major suggestion: Do the right thing, and don't cover it up.
Water damage can be caused by a number of things in the basement - flooding, pipe bursts, wall leaks, floor leaks, a tub overflowing on the 1st or 2nd floor - so it's important to know how the damage occurred in the first place.
Knowing how the damage occurred will allow you, as the current homeowner, to be able to do 2 things:
1- Know what kind of disclosure you need to put in the open on your home if you're putting it on the market.
2- Know what type of repair is needed - depending on the damage, how it was caused, and how much water you were dealing with makes a difference - Plumbing issues need to be fixed by licensed plumbers, landscaping issues can be corrected, and a basement waterproofing system can be installed - but the key is to know what happened, from where, and what your options are.
Young couple buys a home and on the home inspection report there's no evidence of water damage or previous issues with flooding. A few weeks into ownership, they flooded.
Now the real thing that happened was that there was evidence of water damage on some of the finished areas of the basement, studs, dry wall, and even the foundation walls. Now the previous homeowners put a coat of paint on it, dark color, to cover it up - inspection went swimmingly and house is now passed over to this new homeowner.
So now the new homeowners are trying to sue the previous owners for knowing about the issues and passing known issues onto them.
So - you don't want to be the new couple and you also don't want to be on the other end of a law suit.
Best way to do this is to be honest, repair the cause of the damage, repair the damage and be upfront with a.) what happened and b.) what you did to fix and repair it all.
Related Reading and Links
Read about the Top 6 Basement Mistakes that contractors and homeowners make. See what other readers have asked in Safe'n'Dry Basement Blog's Reader Questions Section
Ask Jacob A question Directly on Pioneer Basement's Help Forums!