These cars still have a purpose to serve, some may make perfectly fine daily drivers others could be good for projects, and yet others could be used for parts. Any time you are buying a used car you should inspect it thuroughly, especially if buying from a used car dealer as they tend to get most of their cars from auctions.
water damage is generally pretty easy to spot. first look for obvious things like a water line staining the interior or light housing full of water on a car too new to have bad seals, then of course look for rust or corrosion. Check the oil to make sure it isn't milky (and trans fluid if automatic). then look for sand, silt, and mud hiding in crevisis. don't be afraid to pull the carpet in the trunk/cargo area back either, a lot of times if you pull the liner away from the sides in those areas you can fit you hand down in the rear quarter panel, these areas will often collect water or mud in a flood car and it will stay there forever if no one pulls the carpet back. Another easy thing to check is the drain plugs, Most cars have drain plugs on the floor boards and throughout the enderside of the chassis. Normally these will have some undercoating on them, If you look carefully you may notice signs that they have been removed, this could indicate a flood car.
Now these things don't necessarily mean it was in fact a flood car or even that it is not a good car, but they are signs of a possible flood car and should definitely be used as leverage for a better deal.