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I get mansion is the biggest one but cant really tell between a house and a cottage. Also how do I use exterior pieces like walls and a roof? I got one I like but says I can't use it. Is that because I bought a permit and a house was placed there instead of building from scratch?
There are different sizes and local restrictions for each item.
Ex:
Cottage in Mist, you can only use Riviera Cottage Roof/Wall/Fence items.
Cottage in Lavender Beds, you can only use Glade Cottage Roof/Wall/Fence items.
Cottage in The Goblet, you can only use Oasis Cottage Roof/Wall/Fence items.
Be aware that the doors & windows are also exclusive to those locations while the roof decorations, placards and external wall decorations (like awnings) can be used regardless of location.
If you don't know what you purchased for some reason, a small house aka cottage'll only have 2 floors (the main one and basement) whereas the house (I usually refer to it as medium house) has 3 floors (main one, basement and a second story).
Walls separate from fences or they considered the same? Like Oasis Stone Wall would override Oasis Ornate Fence?
I do believe those are two separate things. The wall would be what's on your house and the fence is what borders your yard. The exception would be complete sets like Moogle walls, Eatery walls, etc. I doubt you are looking at those though as they are very expensive to buy or take a ton of crafting in your FC workshop (like I'm chipping away at).
If you look at the item descriptions, one should be labeled ExteriorWall and one should be labled as a Fence. They probably could have done a better job naming them. ^^ They're different things so they won't override each other.