I own a home that was built in 1890. At some point, someone added on a small back room. They built it right on the ground. I had to tear out the entire floor, so now have the walls, the roof, and rafters. In places, the sill plate is totally gone along with portions of the wall studs. I think it's termites. They ate about a foot of the wall studs. I want to put in a foundation and save as much of the existing walls as I can. What should I do?
Your situation sounds dire, especially because there is visible rot and termite damage to your home's sill plates and wall studs. Although I don't usually encourage readers to shy away from a challenging remodeling project, sometimes it is better to cut your losses and build new. In fact, you may even save yourself some money and frustration by completely rebuilding this room as opposed to trying to save the existing one (termites and all!).
One money-saving option that you might consider is to deconstruct the existing room instead just leveling it with a bulldozer, because this could yield some solid rafters and other valuable lumber that you can re-use in the new construction. With a little effort, a crow bar, and a Sawz-all, you could probably deconstruct the entire room in just a few days. Keep in mind, the key to a successful deconstruction project is to avoid pulling every nail and board from the structure and only go after the lumber that is worth saving. For example a short 2x4 that is full of nails is probably not worth your time, but it might be well worth your effort to salvage and re-use some long 2x12 rafters. Deconstruction projects are worthwhile not only because they can keep usable building materials out of the local landfill, but because old homes such as yours are often chock full of high quality lumber.
When planning for your new room, make sure to include both a termite shield and treated lumber in your framing details and follow the latest building codes for your local area. Although it can take a little more time (and oftentimes more money) to build things right the first time, your payback can be a trouble-free addition that lasts decades. Good luck with your project!