You should consult with local legal and tax counsel. Were there probate proceedings?
Regardless, generally, the property would receive a stepped up basis (to fair market value on the date of death) since the transaction did not close until after her death.
The proceeds would typically be divided according to the dictates of the will which, in this case would be 50% to you and your spouse (or only your spouse) and 50% to the grandchildren. The basis (stepped up) would also be split 50/50.
