Two weeks ago a man came to my house with a guitar he had "found in the attic" at a house he was renting. I told him it was worth at least $3000 or $4000. He offered it to me for $1000. I smelled a rat but knew it was a chance to make some serious money so I bought it. I then incurred some expenses doing some repair work to it and paying to have it appraised officially. This morning he called me and admitted it was stolen as he was sitting right there with the (supposed) rightful owner of the guitar. They want it back and have agreed to reimburse me for the $1000 plus my expenses. I smell a rat again as they may have discovered just how much it's really worth and just want it back so they can sell it. It was appraised at $27500 which I didn't disclose to them. It might be that they just want to undo a deal so he won't get into trouble. Since no police report was ever filed no claim of theft or loss was ever made am I obliged to return it to them just on their word or should I insist that if it IS stolen they report it as such at which point I would let them know that because of it's value it is now a Class B crime with a fine of up to $20000 and up to 10 years in jail. Yes I'm sure it would then be seized by the police (maybe) and I could potentially lose the guitar AND over $1000 but that doesn't compare to the trouble he'd be in. How do I handle this?