Oy, this is a difficult problem. I'm sorry you're having issues with rotten wood, etc. But, here's the thing, if you think the previous owners should be held liable for this, you need to know that the onus is on you, the buyer, to prove that the sellers had prior knowledge of this defect and purposely didn't disclose it to you. How are you going to do that? I mean, if you didn't discover this for 12 years, maybe they didn't know it was there either. Maybe it wasn't there when they owned the house.
I would examine your own heart and ask yourself what you would think if you had sold this home a few years ago and the new owners discovered it after they bought.
Also, I would get rid of EVERYTHING that is damaged and replace it. But, first make sure you know what the cause is and rectify that before you do anything.
If you think you can absolutely prove beyond a doubt, that the former owner was aware of a problem and purposely covered it up to conceal a known issue, that might be something to talk to an attorney about. Without that proof, I'm afraid you are going to have to fund these repairs by yourself.
In the last 12 years, if you haven't become very familiar with a caulking gun, this situation probably falls into the category of "deferred maintenance", which was deferred too long and resulted in a moisture infiltration problem.
I am not, and we are not, attorneys. But since this is a simple matter of facts.....
The statute of limitations runs for 3 years. So that is out. As for any builder's warranties, this would be covered, but runs out at 2 years for the walls and systems. The foundation and roof are covered by the statutory warranty, but even those run out at 10 years. It is my opinion that you are on your own. The next time you purchase make sure you have a good home inspector that won't miss things like this.
It is unfortunate that there is damage to your home, but I feel you are going to spend more money and invest more time trying to go after the former owner than you would if you had a contractor just come and fix the issue.
As I always suggest, A call to a qualified real estate attorney is always your best bet. We as agents are asked to interpret the law and it's the attorney's job to know the law.
Good luck with it,