The use of the words "over there" imply a "pointing out" of the house. If you imagine standing on a street with a friend and saying this phrase, you most likely would physically point to the house. In this scenario, you would say (pointing) "That house over there is beautiful".
If you didn't physically point to the house, you would likely say "That house over there with the green roof is beautiful". Either way "That" is the word you want to use. Having said that, using "the" would not necessarily be "wrong" - it just wouldn't be natural.
