I often meet with clients who have just received an aggressive, all-cash offer on their late mother’s Brooklyn brownstone. They want to sign the paperwork, clear out the furniture, and divide the proceeds among the siblings. But there is a fundamental problem. They do not legally have the power to sell it yet.
Inheriting a house does not automatically grant you the authority to sign a deed. Before any real estate transaction can occur, the estate must pass through Surrogate’s Court. We approach these situations not just as a property transfer, but as an exercise in legacy stewardship. Real estate is often the most valuable asset a family possesses. Liquidating it requires deliberate, methodical legal work.
Securing the Legal Authority to Sell
The first hurdle is obtaining formal recognition from Surrogate’s Court. If the deceased left a valid will, the nominated executor must file for probate. If there was no will, a close family member must petition for estate administration.
Until the court issues Letters Testamentary or Letters of Administration, nobody has the legal standing to sign a listing agreement with a broker, let alone execute a contract of sale. Buyers and their title insurance companies require absolute certainty that the person signing the deed has the authority to transfer the property.
Under New York’s Estates, Powers and Trusts Law (EPTL) §11-1.1, a duly appointed fiduciary holds the statutory power to sell, mortgage, or lease real property owned by the estate. This power only activates once the court formally appoints the executor or administrator. We frequently see families lose eager buyers because they listed a property months before the court granted them the legal authority to close.
Understanding the Step-Up in Basis
Once the legal authority is secured, the conversation naturally turns to taxation. Families often assume that selling a home purchased for $40,000 in 1978 and sold for $1.5 million today will trigger a massive capital gains tax bill.
Usually, this fear is unfounded. The federal tax code provides a step-up in basis. When a property owner passes away, the tax basis of their real estate adjusts to its fair market value on the date of their death. If the executor sells the property shortly after the passing for that exact market value, the capital gains tax is generally zero.
This tax mechanism is a critical component of generational wealth transfer. However, if the family holds the property for several years before selling, any appreciation in value between the date of death and the date of sale becomes subject to capital gains tax. Timing the sale of estate property requires a prudent approach—balancing a favorable market with the reality of tax liabilities.
Fiduciary Duty and Fair Market Value
Being appointed as an executor is not a license to treat the property as a personal piggy bank. It is a strict fiduciary role. You are a custodian of the estate’s assets, acting for the benefit of all heirs and creditors.
If there are three siblings and one serves as the executor, that executor cannot sell the property to their own child at a steep discount to keep the house in the family. Selling inherited real estate requires a documented approach to securing fair market value. The fiduciary must act in the best financial interest of the estate as a whole.
If the property is sold significantly below market value without the written consent of all beneficiaries, the executor can be held personally liable for the difference. The other beneficiaries hold the right to challenge the transaction during a formal accounting in Surrogate’s Court under SCPA Article 22, demanding the executor make the estate whole from their own pocket.
The Carrying Costs of an Empty Estate
While the legal and tax mechanisms are being sorted out, the physical property still exists in the real world. A vacant home is a liability.
Families often fail to realize that standard homeowner’s insurance policies generally do not cover properties sitting vacant for more than 30 to 60 days. If a pipe bursts or a fire breaks out in an unoccupied inherited home, the insurance carrier may deny the claim entirely. In cases like this, we typically consider advising executors to secure specialized vacant property insurance immediately upon their appointment.
The estate is also responsible for carrying costs—property taxes, utilities, and maintenance—while the house sits on the market. If the estate lacks liquid cash, the executor or beneficiaries may have to advance these funds out of pocket. They must keep meticulous records to be reimbursed at the closing table. Delaying a sale due to family disagreements or disorganized legal filings only drains the estate’s overall value.
Addressing Creditors and Sibling Buyouts
When an individual dies, their debts do not. Before the proceeds of a real estate sale can be distributed to the beneficiaries, the estate’s obligations must be addressed.
Title companies will conduct exhaustive searches for unresolved judgments, mortgages, or Medicaid recovery claims attached to the property. Selling the home is often the primary mechanism an executor uses to generate the liquidity needed to satisfy these debts. Only after the creditors are paid and the final tax returns are filed can the remaining funds be safely distributed to the heirs.
In cases where one heir wishes to retain the family home while the others prefer cash, a formal buyout arrangement becomes necessary. The executor cannot simply transfer the deed to the interested sibling. The property must be professionally appraised, and the purchasing sibling must buy out the other shares, either by using their own external funds or by accepting a correspondingly smaller share of the remaining liquid estate assets.
Stewardship. That is what this process ultimately demands. A home is more than wood and brick—it is the physical culmination of a lifetime of work. Liquidating that asset requires respect for both the law and the family’s future.
If you are managing an estate that includes real property, schedule a deed and title review with our office before you sign a listing agreement with a real estate broker.
