|I don't think they tell you the right answer to each individual question, just your overall score, right?|
I'd choose 2. There isn't any actual crime until they buy the property and fail to take up residence. Since the crime hasn't happened yet, I think it would be futile to report it to law enforcement.
But I wouldn't want to be part of an illegal transaction, and if I merely report it to the closing agent, I would be letting the closing agent determine whether or not I'm connected to an illegal transaction.