To alleviate your fear, use a Purchase and Sales Agreement that states that your earnest money is full liquidated damages if you the buyer do not perform.

I know he is into drugs and has had LOTS of visitors at his house.What are my obligations?

What if the business is illegal and is just cash, like drugs, prostitution or gambling?

From what we heard, the previous owners had rented to people who were doing/dealing drugs.

It was vacant and some one moved in and set up some sort of drug ring.

I get hijacked by Mexican drug cartel and put on an airplane and while I'm being slowly dissected while still alive and with no pain killers the plane crashes into an active volcano...

We obtained the police report which shows drugs were found in the apartment.

The second place seemed to be much better but then while I was walking around looking my wife saw two instances of drug activity in the area.I would really love to purchase out of state if I could reduce the risk as much as possible up front.

I doubt that they have money to dispose, unless it is drug money they need to clean.

You'd have to be dealing drugs on the corner to get into a transaction that carries a perceived greater harm to the public.Slick talkers that convince someone to pay significantly more for a property than it's really worth is stealing by deceit, it's not clever negotiation it's theft of future equity.