I would tell him that the property line is the property line and it is what holds true for all things, like selling the land, ownership, etc.
Say it nice and tell him thats the way it is.
Did this guy deliberately build his home on the land that was not his? (how much land does he own?)
I have a neighbor that has taken it upon himself to "take care of" land that is not his, about 1 acre of a corn field that has a low spot in it for drainage and he dug a drainage ditch threw this corn field and uses that 1 acre land for his use, like riding ATVs, landscaping etc. The real owner of this land lives out of state so he doesnt know. But I would be super *issed off if it was me. Sometimes being up front and direct (and kind of a *ickhead) is the way to go.
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