It is fairly simple to spot drywall that is damaged by water. The walls will be cracked or discolored, and there may be obvious signs of drywall tape hanging off the wall. To the touch, the wall may feel swollen and/or spongy. Depending on the extent of the damage and your comfort with do-it-yourself projects, you may choose to repair the drywall yourself.
For smaller damage that has been done only to the exterior of the drywall due to flooding or another external reason, you may only have to sand down the surface and patch the area. After sanding, cover the affected area with drywall tape and use a putty knife to smooth a lightweight drywall compound over the tape. Let the compound dry, sand the area down until it is smooth, and then re-paint the surface.
If water is leaking from behind the drywall, you will want to locate the source of the problem and fix it before proceeding with repairing the drywall. Once any continuous water leakage problems are fixed, you will want to cut away all damaged drywall and remove the insulation. Cut the drywall in a shape that will be easy to replace such as a square or rectangle.
Inspect the structure behind the wall for any signs of mold damage or decay. For soft, spongy-feeling structure, the entire support will need to be replaced. If this is the case, you may want to bring in a professional for inspection and repair. If the structure looks blackened with mold, but does not feel spongy you can go ahead and treat the wood with a mold inhibitor such as household bleach. After you have treated the wood, let it dry completely and replace the insulation before proceeding with replacing the drywall.
Materials to replace drywall are fairly inexpensive and can be found at most hardware or home improvement stores. Here is what you will need:
* Drywall (measure the thickness of the remaining drywall to determine the correct width)
* Lightweight drywall compound
* Self-adhesive drywall tape
* Medium and large putty knives for taping, and also for application of the compound
* Utility knife
* Drywall Hammer or Electric screwdriver with a drywall setting
* Stud finder
* 4-foot T-square to aid in cutting the drywall
* Measuring tape
* Sander
* Drywall nails or screws, depending on whether you are using a hammer or screwdriver
Begin by measuring the hole in your wall, then measure and trace the same dimensions on your sheet of drywall. Use a T-square to aid in cutting the drywall with a utility knife. Once the drywall is cut to the correct size, place the piece into the hole in your wall. Use a stud finder to locate studs where you will nail or screw down the drywall. Be careful not to cut through the first layer of the paper on your drywall with the nail or screw head.
After the drywall has been secured, use the self-adhesive drywall tape to cover the seams between the new and old drywall. Smooth down the tape with a medium putty knife. You will then apply drywall compound on top of the tape with a large 6″ putty knife, extending out a couple inches over each side of the tape. Allow the compound to dry, and then sand it down. Keep applying compound and sanding in this fashion until the seams are well-hidden. Once the seams are hidden and the compound is completely dry, you can then sand down the area and re-paint.

