There are many ways to approach such a problem, but I think beginning with a structural engineer makes the most sense. A licensed engineer (someone with P.E. or S.E. behind their name) should be able to evaluate the wall's current condition and provide a certified repair plan that takes into account the soil that is on your property and the best way to support the house above during a repair of this nature.
Engineers are not typically associated with a particular construction company so you can be fairly certain you are getting an assessment of your structure without feeling like they are just trying to create more unnecessary work. Engineers are not cheap, but will likely be far less expensive than the actual repair work done.
If you plan to pull a permit for this type of job, which you should for everyone's sake, you will be required to have structural work approved by a licensed engineer anyway. That's why the engineer is the best place to start.
I would be careful before following advice to pursue a lawsuit because this problem was not disclosed by the seller. I caution mainly because you said yourself that the problem was not apparent until the walls were stripped for renovation. I think this may simply be a problem that you need to handle on your own, sorry, but that is the risk of purchasing any home.
In the case that you don't have the money to rebuild the walls right now I would suggest in addition to getting a detailed repair plan from the engineer I would also ask for their ideas on how to support the wall temporarily without the cost of rebuilding. They may have some creative ideas on how to support the walls from bowing any further without being as much cost as a full rebuild. This would buy you some time while you save for the full repair. I would expect the engineer to charge a little extra for this information, but it may be worth asking for if it offers a safe, but temporary repair.
I designed a support like this before that placed wood on the inside face of the wall and was supported between the floor joists and the concrete floor. The space between that wood and the block wall was then grouted to keep the wall from bowing further. Obviously the engineer is needed to tell you what size of wood, how frequently, how to connect it to the joist, how to connect it to the floor... etc.
I would expect a starting fee for the engineer to be close to $250 and up, this may vary widely depending on your part of the country and how much investigation is necessary to make a quality report. When selecting an engineer I would look for a small company or sole proprietor. Make sure they are licensed in your state, can visit the property in person, and have at least a little insurance - maybe 200,000 at a minimum? Larger companies are typically looking for large projects and would likely not service a smaller project like this.
Structural Engineer in Colorado.
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