How do I update my kitchen wall panel damaged by water?
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Depending on the damage, the sheetrock may need to be replaced. You want to check for mold and treat it, Robin. Here's a link with more information:
https://www.familyhandyman.com/plumbing/12-tips-for-water-damage-repair/
What kind of wall panel do you have? Was it flood or broken plumbing damage or simply water splashed from a sink?
In almost every case, materials structurally damaged by water need to be replaced and in doing so you can update to anything you would like.
If the wall is still structurally sound there are really nice stick-on vinyl backsplash panels available from Amazon or Home Depot for short money.
Robin....You may have to remove is badly damaged and just replace with other material of your choice such as, wall board, tin, ceramic, etc. Lots of products out there...Google to see some of them. Good luck
Removing it is probably a good idea, since it could grow mold due to the moisture.