$3500 Earnest Money Counter Offer?

[Rhondalette W.]

Hey BP, I made an offer on a SFR potential rental property for $104K in my offer I suggested $100 option fee for 10 days and $1000 earnest money. They countered back with same price $104K but wanted $3500 earnest money and only 7 days option period. Why would the sellers want so much in earnest money? How does this benefit them? Will the full amount of the earnest money be applied to the price of the home? I am confused...

Can any of you explain earnest money and the related rules?