This will help avoid the loss of earnest money and might create some income. 

Why would you take a loss because of their poor behaviour.

She opted for the The Georgia "Works Deluxe" Package for about $330.The only complaint so far is that the content provider loss her progress for a few days due to some systems outage.  

What would you suggest is the best way to approach or "solicit" the owners while still being empathetic to their loss of family member?

You have to weed those people out fast upfront as anytime spent with them is a loss of income with wasted time. 

I am currently drafting my "Risk" section of the Agreement and don't want to write anything that is untrue, or give a false sense of security when it comes to overall risk of loss beyond potential of partial/full investment loss on a specific project.

You must know the market and be prepared to take a loss should the market turn against you.  

At the same time, i understand sometimes you just have to cut your losses.

I hunted around, and I don't believe there is (I believe this is separate from the 150K AGI limitation on taking passive losses against wage earning income).  

I drop off opportunity loss costs and capex/vacancies for my own purposes, though I do have strong reserves for the latter and a reasonable feel for the former (I have virtually zero vacancies, all of my units start completely rehabbed, and I keep an eye on other opportunities should I wish to sell and go into something else).I don't have to micromanage this aspect because I have a good mix of free & clear and lightly leveraged.