I figured it out. Missed one small thing the whole time. You MUST use DNS Forwarder (I tried dns resolver but had no luck, and in the domain overrides section there is no source ip), so what I did was on kenansville.local pfsense, I added host override of realestate.kenansville.local to 192.168.2.2 and under domain override I added kenansville.local with ip 192.168.2.1@192.168.1.1 and that works perfectly :) I hope it doesn't mess up any resolving of pc's on the kenansville network though. I have no way to test that at this moment.
Not sure why there was a DNS request time out in this nslookup but here is the report below:
Here is a current nslookup and ping:
C:\Windows\system32>nslookup realestate
Server: router.kenansville.local
Address: 192.168.1.1
DNS request timed out.
timeout was 2 seconds.
Name: realestate.kenansville.local
Address: 192.168.2.2
C:\Windows\system32>ping realestate
Pinging realestate.kenansville.local [192.168.2.2] with 32 bytes of data:
Reply from 192.168.2.2: bytes=32 time=103ms TTL=126
Reply from 192.168.2.2: bytes=32 time=106ms TTL=126
Reply from 192.168.2.2: bytes=32 time=113ms TTL=126
Reply from 192.168.2.2: bytes=32 time=109ms TTL=126
Ping statistics for 192.168.2.2:
Packets: Sent = 4, Received = 4, Lost = 0 (0% loss),
Approximate round trip times in milli-seconds:
Minimum = 103ms, Maximum = 113ms, Average = 107ms