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Stuck with foreclosure on a house that has structural issues - Short sale?

TLDR; We acquired a property in late 2023 and subsequently encountered difficulties with mortgage payments in 2024, leading to foreclosure proceedings in 2025. We have recently discovered significant structural issues with the home.

We purchased a house in Minnesota in late 2023 without an in-person viewing, relying instead on inspection reports, appraisals, and our real estate agent's assurances. Upon moving in, we observed signs of structural instability, such as uneven floors and unusual support beams, in this small farmhouse originally built in the late 1800s. We did not think much about it given it is a very old property.

By mid-2024, I experienced job loss, which impacted our ability to make mortgage payments. Foreclosure proceedings began in early 2025. We have been working to delay the foreclosure through various means, and now we have approximately one month before the property is scheduled for auction.

We attempted to sell the house in mid-2024 after realizing we could no longer afford it, but after seven months on the market, there was no interest. The property was relisted at the beginning of 2026, again without success, and potential buyers noted concerns about the uneven floors. We recently hired a structural engineer and his assessment indicated that repairs would cost at least $200,000. While some acquaintances have expressed interest in buying our house, their offers are significantly below market value, suggesting a short sale, which would require bank approval.

The house is currently valued at approximately $365,000. Given the structural problems, we are seeking advice on an appropriate offer price, or if a "Deed in Lieu of Foreclosure" might be a more suitable option. We also want to inquire about the possibility of a legal action against the inspector who provided a clear report, despite mentioning sagging floors.

We have already invested around $100,000 in renovations, placing us in a challenging financial position. We are seeking guidance on the best course of action given our current circumstances and time constraints.

Thank you in advance for your help.

submitted by /u/Adventurous_Line3371
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source https://www.reddit.com/r/RealEstate/comments/1sjlho6/stuck_with_foreclosure_on_a_house_that_has/
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