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Did the on demand hot water heater you bought have an incoming water temp sensor? or variable flame? alot of cheap on demand hot water heaters are either on, or off, so if you are just using a little water it will either cycle on and off, or over heat it, and if the incoming water is already hot, then they still come on and over heat it, or get confused and cycle on and off because they don't always monitor the outgoing temp, they just monitor the amount of water going thru the water heater, of course some of them do monitor the in and out temp, and heat accordingly.
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