Quote:
Originally posted by Rodeo
Your first sentence is correct, but your accuracy goes downhill fom there  ... free advice: Consult a lawyer. If that house and sideyard have been there for 15 years, she owns the property underneath it, at least under traditional adverse possession law. Florida might be different.
You really really need to talk to a lawyer before you make your decision.
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I have to agree with that. I was talking with my wife during dinner about the situation, she's just a law student, but was saying similar things.
If the property the house sits on is taken away from the lot you're buying, and if the remaining portion of your lot is too small to build on, you might end up owning a piece of real estate that would only be sale-able to a neighboring property owner if one of them wanted a larger sized lot. This condition could significantly reduce its market value.
My earlier comments about any potential risks of the IRS coming after you for any "gift taxes" if you offered the property to the encroaching house owner at below market prices should not be an issue so long as significant consideration (the $35K would be considered significant consideration) was involved in the transaction.
I know you've said you want to keep your relationship with the builder on good terms, but if it turned out that buying the property was going to be a really bad deal, you might not have to go through with the transaction based upon both parties inaction to complete the transaction in a timely fashion. (You did say you were thinking about getting out of the business, so preserving the business relationship might not be your top priority.) Your earlier agreement to buy the property might not represent a valid contract any longer because neither of you acted to conclude the transaction in a reasonable period of time.