you have to be within so many tiles of where the house sign is going to be when placed. not sure on exact distance though. At least i have always had to be.
A Goblin, a Gargoyle, and a Drow walk into a bar . . .
That doesn't seem to be it when it's not properly placed get the some obstacle blocks message but tool stays open as normal when it is properly placed get can't reach message and tool closes
I assume you are playing 2d client, the small game window, push it to the top left of the screen. then it will line up, if your small game window is anywhere else you are off target
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