If your sale is a cash transaction it only must satisfy the buyer… so yes, you could sell AS IS without fixing the furnace as long as your buyer is ok with it.
However, if your buyer is financing the purchase you will most likely need to repair or replace the furnace before the mortgage will be underwriting approved… a safe, permanent heat source is required to make it a habitable living space.
Most often a red tag results in a new furnace because repairs often cost as much or more than a new furnace… but repairs could also be acceptable. Depending on the reason for the red tag, repairs could be just a short-term fix.
Buyers should talk to an HVAC professional if it is repaired so you understand the situation, and be prepared for possible replacement in the not-too-distant future.
Sharlene Hensrud, RE/MAX Results Twin Cities Realtor