Earnest Money on a Wholesale Deal

[Nicholas Hooyman]

Im putting together a business model to pitch to an small investor for a relatively small amount of cash to front the money to conduct a thorough wholesaling campaign after i take the bar exam in July. I want to make sure he adequately prices risk into his investment. As such, i want to walk him (and myself) through every step in the process and where his (and my) risk lies. My questions have to do with putting earnest money down for the initial purchase contact:

All things being equal (understanding every seller is different...)

(1) How much earnest money have you seen as the norm? 1% of the purchase price, 2%?

(2) Is there anyway to make that refundable (and if so, does that often kill the deal?)? E.g. could you put the earnest money in escrow with strict instructions instead of giving it straight to the seller?

Thanks for your time everyone!