Defensive offer, or have house prices become so expensive?

Simply move in yourself for a few years. Then you can sell it. As many have already written, the owner-occupied family property is tax-free.
You also haven't mentioned where the valuation comes from. Go to a tax advisor. Maybe the valuation can still be discussed…

So to put it another way: The real estate market has changed so much that a single-family home in a desirable residential area next to a university is something very special and therefore no longer normal. This is reflected in the sharply increased market value. This is, in fact, initially a (value) gain and it has not been taxed yet. And the state often wants taxes on that gain. One could say, as long as this gain is not realized, no tax should be due (similar to stocks). This is quite well regulated with real estate; if you use it yourself for 10 years, no tax is due (unrealized gain), by the way exactly the same applies to real estate that you have built yourself. If you do not want to use it yourself, then that is a private matter, a hobby, etc. If the value is realistic, you will also have no problems financing it.

Yes, how do you come to that?

1. Tax exemption for owner-occupied properties
2. In many regions, an older house is also on the market for 400k. Sure, often in need of renovation, but that's the benchmark for inheritance tax. With the exemption amount, you can get very far on your own.
3. Otherwise, one very often stays below the 800k that you have with 2 children. The forum here somewhat distorts perception with all the 200sqm + basement + KfW40 + 20kWp solar system + KNX + ... houses ;). Normal people are long gone at those sums.

I dare say that for at least 80% of houses no inheritance tax is due at all, and for the vast majority of the rest only a negligible amount of a few thousand.

It is boring to answer questions that are completely clear. Either I sell or I take out a loan for the taxes. Was there a third solution?

That cannot possibly be serious, if it is, it is a slap in the face for the other participants who have shown you this here several times.
With that, I'm out of here as well, good luck with Schrödinger's house.

You can't say it enough, but going to the tax advisor is really the most important recommendation from the last few hundred posts. I don't know enough about it, but it's probably possible for the children to buy the house with a registered right of residence for the father and all remaining direct descendants during the father's lifetime in such a way that no tax is due in the end. The right of residence reduces the market value so much that the tax exemption limit is probably sufficient. At the very least, the father should already include the grandchild in the will, because that brings an additional 200,000 EUR tax exemption on the total value. Is another grandchild completely unrealistic? If biological impossibility, I offer myself for adoption! But only if really doesn't want me.

In case of biological impossibility, I offer myself for adoption! But only if really does not want me.

We could adopt you temporarily, at least until the garden and the outdoor facilities are finished. We will treat you like our own children (no idea why they don’t want to hear from us anymore) and we also grill more often in the evenings (AFTER work); every second weekend is off. Really great with us......