Bonnie Hinchcliffe says her dream house has turned into a nightmare; the walls are literally falling in around her.

"Our jaws dropped to the ground. Is this actually happening to us right now?" said Hinchcliffe.

Following a home inspection, Hinchcliffe and her husband bought the 1960 Transcona home in November.

All seemed well until Christmas time when Hinchcliffe's husband noticed a draft in the basement ceiling and worse upon closer inspection.

"He pulled out the insulation and noticed that there's daylight coming from where there's not supposed to be daylight," said Hinchcliffe.

Eventually they pulled drywall down and discovered the problem wasn't isolated. In some spots concrete had come off the foundation and lay in a heap behind the drywall.

“We can hear pieces dropping down, crumbling."

On top of that long horizontal cracks exist inside the basement and cracks outside behind this insulation.

As a result Hinchcliffe says cracks are also forming upstairs on the walls and the main floor is no longer level.

“We're just waiting for every night for the corner of the house to collapse.”

The City of Winnipeg also has concerns. In a letter it ordered the couple to fix the foundation, or at least have permits in place by July, or face possible demolition:

The letter states: "A recent inspection of the subject property has revealed a hazardous condition. Specifically the interior basement foundation walls are showing signs of failure.”

The cost of repairs for the quarter million dollar home could run as high as $126 thousand dollars according to one quote, an amount Hinchcliffe says they can't afford.

"It still brings a lot of emotion, a lot of tears, sleepless nights," said Hinchcliffe.

Gary Stevenson of Talon Construction has been in the business for 24 years. He toured the Hinchcliffe’s house.

“This one's in the top ten for bad," said Stevenson.

Stevenson said there are several reasons why the concrete could be failing: it may have been poured in the cold, or not heated properly or sat in the trucks for too long.

“You could just sit there and keep rubbing it and the next thing you know you're rubbing mud and you made your way through the wall," said Stevenson.

Hinchcliffe says to date insurance isn't covering any of the work, and she says lawyers have told her legal action could cost tens of thousands of dollars with no guarantee of victory.

"It's hard, it's very hard knowing that there's no one here that's willing to help us," said Hinchcliffe.

CTV News spoke with the home inspector who did the pre-sale inspection. He tells us because of the foundation issues being covered up by drywall and the extra insulation outside, the damage was not visible.

According to the association that represents home inspectors, inspections must be non-invasive.