Earnest money in due diligence. Non refundable?

[Terry N.]

Got this response from a seller.  Does this sound reasonable?

“…seller accepted most of the initial terms of the offer, but requested the earnest money be $3500 in due diligence (non refundable) and $1500 in earnest money.”

what would your response be? 
totally rehabbed place with a one year warranty.  

[Joe S.]

Quote from @Terry N.:

Quote from @Joe S.:

Really need to hear a few more details about the terms of the offer.

 Hey Joe,

And thanks Elliot and Sierra...

$300K sale price.  Started out with just a basic $5K earnest money held in escrow. 30 Day due diligence. 

No Due Diligence fee...

Fairly competitive market (aren't they all)...

House had a beautiful renovation including electrical and plumbing, contractor offering 1 year warranty.   Likely counter of flipping the $1500/$3500

So if I’m reading this right the sellers don’t want to be on the hook only and give you a free 30 day due diligence. 30 days due diligence is not smiled on by many sellers. Could you lower your due diligence and ask if they would lower their option fee as well?