Mira could mean she or he looks, couldn't it? They should be listed as alternatives.
I also don't understand why "You look at that house" is wrong. Can someone explain it?
The, "yo" form isn't being used, it's being used as a command in the he/she/you(formal) form. Saying a command in English starting with ,"You, Look at that house" would be rude and I hope you don't use that.
Mira is third person tense and so he/she/it works well 'it' doesn't work. If this was imperative wouldn't it be mire.
I believe you are right. "He looks at that house" should be an acceptable translation here. Mira is correct imperative for the tú form, mire is correct imperative for the usted form.