The amount they paid for the home is irrelevant. The house got a step up in basis to fair market value on the day of their deaths. (Whether this happened in 2 stages or all when the later person died depends on what state they were in, how title was held, etc. Consult a tax pro for more specifics.) The estate has the same basis in the house as the heirs would if the house were transferred to them directly.
The estate should probably sell the house. After basis step up and costs of sale, the estate will likely have a loss, which can be passed through to the heirs on the estate's final return. The numbers are the same, but you only need the executor's signature for the sale, versus the 3 heirs' signatures.
The estate has been open for over a year. Did you need to file an income tax return? (Form 1041) If the estate sells the house, it will need to file an income tax return to report the sale, basis, costs, and can deduct estate admin costs. See a tax pro who does estate income tax returns for more help.
This post does not constitute legal advice, nor does it create an attorney-client relationship. Postings are based only on the information provided and you should consult an attorney in your area before relying on information contained in this post.