I would error on cautious side (pay her back) when family is involved, but that is me.

But it was only a small slice of my nest egg.Finally, know what you're doing when you get involved. 

Understand the fees involved and calculate the total cost for an entire year of management so you can compare the different managers.

I have never been involved in a hard money transaction before so I’m looking for any advise and/or suggestions on the subject.

Study them and decide on the one you will be putting all your efforts on.Lastly go ahead and look at the different options you have to start getting involved: Go and work for an established local (or not) that does what you want to do, become a member of an investor club where you can potentially partner up with experienced investors (you need to bring value), start deploying some capital into some passive opportunities to start learning the process, start buying some properties with your own capital and grow from there....I hope this is somewhat helpful.

@Dennis M. unless there’s integrity involved, which is unfortunately missing in some landlord-tenant relationships.

What are the risks involved?

It's more trying if there are shotguns and/or pitbulls involved, but fountains of tears are not the easiest thing to deal with, either. 

We signed a Contract a year ago to build, financing was not involved. 

3 - Is there a process involved if money has been spent and seller does not want to renew purchase contract?