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Lesson learned: I should have just told the builder to leave me out of it and tell him that the builder was refusing to modify the contract, so he had to move his stuff before my landscaping starts.
So is that how it ended? He moved his stuff on to his own property and you went ahead as originally planned?
Would you really just give it away? Sorry, maybe I am a jerk. I just couldn't do that.
I understand not wanting to give it away but I would have only dealt with the builder and let him figure it out and if he didn't want to adjust your sales price for the slightly reduced plot size, I probably would have just accepted that. I fear that you are starting off on a bad note with your new neighbors and I think that may be something you regret long term.
We went through something similar a couple years ago. We bought an existing house on a culdesac...house was about ten years old, on a triangular shaped lot. Unbeknownst to us, the front corner of our neighbor's driveway was partly on our property. We had a new backyard fence put in, and the guys from the fence company used the property markers to determine where to place the fence stakes (like they're supposed to). Only problem was, when the neighbors had their sprinkler system put in, the installer went by where they THOUGHT the property line was. Supposedly, the developer was going to fix the markers and get the property lines adjusted with the city, but never bothered to do so.
The fence guys punctured the sprinkler lines in several places. Not a great way to be the new neighbors in a new neighborhood, and cause a couple hundred dollars worth of property damage.
Once I got there, he told me he was only interested in the area his sprinklers were already on (which he could have told me over the phone), but that he thought $3.50 was more fair. So he had me drive all the way down, just to try and talk me down in price. With fires burning in my chest out of anger of him wasting my time on a Sunday afternoon, I politely told him that I thought $4.50 was fair and that I would honestly rather just keep the land myself, but I would be willing to sell it to him to help him out at that price. He said he would get back to me, but he never did.
My builder contacted him and asked him what he wanted to do and he is going to move his stuff.
The odd thing is that if he had not played games with me, I would have sold it to him for $3.50 had he just started out offering me that number. I was just so sick of dealing with his games, I wasn't going to move on the price.
Lesson learned: I should have just told the builder to leave me out of it and tell him that the builder was refusing to modify the contract, so he had to move his stuff before my landscaping starts.
I kept wondering why you were trying so hard to please this guy; who you don't even know. I know, "good neighbors", you want to "get along", all that junk. But you shouldn't have to give in to everything your neighbors want to "get along"; even to the point of selling land you didn't even really want to sell.
Sometime you have to say no to really demanding neighbors. Or Neighbors who let their little kids run around on your property. What about your rights?
Are you sure you want to live next door to this jerk? This episode may just be a "Preview of Coming Attractions", I fear......Personally, I'd probably eat the $2K to get out of it. And look for a property with a bigger lot; probably in an established neighborhood.
Just my 2 cents.....
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Sorry, maybe I am a jerk. 
I just couldn't do that.
