Thank you EVERYONE for your detailed and informative responses. I will elaborate on the situation a little more:
There is a contract for deed drafted, and I have reviewed it, but no one has signed/executed it yet. I've found an experienced lawyer in my area, and will be meeting with him this Thursday. So at this point, nothing official has taken place between me and the investor (NO signatures have been signed on any agreement, and no money has been given).
There are actually two contracts that we will be signing. A purchase agreement between me and the investor, and then the contract for deed between me and the investor. The process that we have verbally agreed upon is this: I find the home I would like to purchase. A purchase agreement between the seller and my investor is written for the home. The purchase agreement will be contingent on inspection. Once the inspection period is over (and therefore my investor is then committed to him buying the home), the investor and I will then sign our purchase agreement between the two of us, with me putting down $1000 in earnest money. We haven't gotten to that point yet, but I plan on adding a caveat to our purchase agreement saying that should his end of the purchase fall through, that I get my earnest money back. A few weeks later, the investor will close on the property between him and the seller. He is then the owner of the home. The following day, he and I will meet to execute our contract for deed. I will review the title work and the deed (showing he is now the owner). We will then sign, I will give my down payment, and take possession of the home. I will be recording the contract for deed with the county.
Does the order of all of this sound logical?
As of today, this is where it is at: the investor has written a purchase agreement (between him and the seller) on the property I found. The purchase agreement has a 10 day inspection contingency. The inspection is being done this Wednesday, and the inspection contingency has to be removed by Friday. By Friday I will have reviewed both contracts between me and the investor (the purchase agreement and the contract for deed) with the lawyer I found. If the investor and I do not agree on the terms of either the purchase agreement or the contract for deed, then the sale will be cancelled. If we do agree, only the purchase agreement between us will be signed (and the contract for deed signed and my down payment given after the investor closes on his side of the purchase).
Tomorrow I will be sending an email to my investor asking for references on him. I want to speak to one of his other "clients" that have done a contract for deed with him to get their opinion.
Is it within my right (and reasonable) to ask for his social security number and run a credit report on him?
Are there any other safeguards you suggest that I do to find out more on the investors background?
Again, thank you for the valuable information all of you have provided.