Three siblings inherit a Brooklyn brownstone after their mother passes away. One sibling has lived in the garden apartment for ten years and wants to keep the house. The other two siblings live out of state and want their share of the inheritance in cash. We see this exact scenario play out every week in our practice.
It sounds like a straightforward math problem—divide the fair market value of the property by three, secure a mortgage, and cut two checks. In reality, transferring ownership of an inherited property is a highly deliberate legal process. A house is not a liquid asset. You cannot split a kitchen three ways.
When a family home transitions from a generational asset to a shared inheritance, the legal mechanics require prudent action. Before any money changes hands or deeds are signed, you must address the authority of the estate, establish an unassailable valuation, and execute a transfer that protects all parties from future litigation.
The Fiduciary Reality of Inherited Real Estate
Before one heir can buy out another, we must look at how the property is actually held. When a homeowner passes away, their real estate does not automatically drop into the laps of their children with clean title. The property belongs to the estate, and the next nine months belong to the Surrogate’s Court.
If the deceased left a valid will, the court appoints an executor. If there was no will, the court appoints an administrator. In either case, this appointed fiduciary is the only person with the legal authority to authorize a buyout or transfer the deed.
Under New York Estates, Powers and Trusts Law (EPTL) § 11-1.1(b)(5), an executor possesses the statutory power to manage, lease, or sell real property, provided the will does not explicitly forbid it. This means the executor must formally sell the property to the sibling who wishes to keep it. If you are that executor, your fiduciary duty requires you to act in the best interest of the estate as a whole—not just the sibling keeping the property, and not just the siblings demanding cash.
If the estate has already been fully probated and the executor has distributed the property to the heirs, the siblings now own the home together as tenants in common. At this stage, the estate administration is over. The buyout shifts from an estate matter to a private real estate transaction between family members. Clients often ask if they can privately sell a house to a family member in this manner. The answer is yes, provided the title is clear and the transaction is legally documented.
Establishing an Unassailable Valuation
Money changes families. Even siblings who have never argued a day in their lives will suddenly find themselves at odds over the value of their childhood home. The sibling buying the house naturally wants a lower valuation to reduce their out-of-pocket cost. The siblings selling their shares want the highest possible valuation to maximize their cash payout.
To prevent disputes, you cannot rely on online real estate estimates or a casual walk-through by a neighborhood broker. You need a formal, certified appraisal. In fact, you often need two distinct valuations:
- Date-of-Death Appraisal: This establishes the value of the property on the exact day the original owner passed away. This figure is required for tax purposes and establishes the stepped-up basis for the heirs under IRC § 1014, which minimizes capital gains taxes.
- Current Fair Market Appraisal: Because estate administration can take a year or more, the property’s value may have shifted. The buyout should be based on the current market value at the time of the transaction.
Once the gross value is established, the math begins. You must subtract any outstanding mortgages, home equity lines of credit, and unresolved property taxes. Furthermore, families often agree to deduct the closing costs and broker commissions—typically around six percent—that the estate would have paid had they sold the property to a third-party buyer. Deducting these phantom costs often results in a fairer net number for the purchasing sibling. Consulting with professional estate and trust advisors during this phase keeps the math objective and the family relationships intact.
Structuring the Buyout
Once the buyout price is set, the purchasing sibling needs to fund the transaction. Few people have hundreds of thousands of dollars in liquid cash sitting in a checking account.
If the estate contains significant liquid assets—such as brokerage accounts or life insurance payouts—the executor might utilize a non-pro rata distribution. For example, if an estate is worth $900,000, consisting of a $600,000 house and $300,000 in cash, an equal three-way split means each sibling is entitled to $300,000. The executor can distribute the entire house to Sibling A, while Siblings B and C each take $150,000 in cash from the estate, plus half of the $300,000 Sibling A pays into the estate. In this scenario, Sibling A only has to finance their own portion, rather than buying the entire house outright.
If the estate is cash-poor, the purchasing sibling will need to secure outside financing. This usually takes the form of a cash-out refinance or a specialized estate loan. The lender provides the cash necessary to pay off the other heirs, and the purchasing sibling takes on a new mortgage in their own name.
Executing the Legal Transfer
An agreement between siblings is just a conversation until it is recorded by the county clerk. To finalize the buyout, the current owners—whether that is the executor of the estate or the co-inheriting siblings—must execute a new deed transferring full ownership to the purchasing heir.
This is not a matter of simply scratching a name off the existing paperwork. Understanding how to get someone off a deed to a house involves drafting a Bargain and Sale Deed or a Quitclaim Deed, depending on the title insurance requirements. The new deed must be signed, notarized, and filed with the local recording office—such as ACRIS if the property is located in the five boroughs.
You must also file the necessary transfer tax returns. While transfers made directly from an estate to an heir for zero consideration are generally exempt from New York State and City transfer taxes, a buyout involves consideration. Money is changing hands. Therefore, transfer taxes apply to the portion of the property being purchased, and title insurance should be updated to reflect the new sole owner.
Finality.
That is the ultimate goal of this process. Once the deed is recorded and the funds are dispersed, the purchasing sibling owns the property outright. At that point, the new sole owner steps into the role of steward. It becomes their responsibility to look ahead, update their own estate plan, and ask questions like whether they can put the house in trust to avoid future care home fees.
If your family is currently administering an estate or facing a buyout scenario with co-heirs, schedule a 30-minute property transfer review with our office. We will examine the current deed, review the decedent’s will, and outline the exact legal steps required to secure your sole ownership.
