The answer "beautiful house" wasn't accepted. Is it still a correct translation, though?
Beautiful is a step up from 'hezky'. Hezky is pretty, beautiful is krásný
But in English pretty and beautiful are not steps apart, they can be used interchangeably
There is definitely a difference between "pretty" and "beautiful" in English, with the latter being, as kacenka9 put it, "a step up." Because there are different words in Czech as well as in English, the course is pretty consistent in not accepting one when the other is more appropriate.
I suppose in English "nice" and "cute" are different. nice being broad and cute being specific to certain characteristics ie. small etc. so maybe its the same with Czech?