Server1 has to handle SSL for both servers. You can’t proxy encrypted traffic1.
So on Server1, you have to do:
certbot --nginx -d houseofavi.com
as well.
1. Not exactly accurate. You can do something called “SNI prereading” with ngx_stream (https://nginx.org/en/docs/stream/ngx_stream_ssl_preread_module.html), but that’s fairly complicated to setup.