Does anyone have any experience with this arrangement?

The REALTOR is required by law to provide proper notice and they can't require you to move furniture or arrange your belongings a certain way.

I made arrangements  with my family to buy the house.

If you're using the money from a HML to do a fix and flip, it is possible to arrange a deal where you pay them back after you sell the house and close escrow. 

Hours spent by any person with respect to the owner’s capacity as an investor, such as arranging financing, procuring property, reviewing financial statements or reports on operations, planning, managing, or constructing long-term capital improvements, and traveling to and from the real estate are not considered to be hours of service with respect to the enterprise.

If that's the case, I think 25% to you is a fair arrangement, after all you have no risk in the deal.  

The holding period in the current property has been about 8 years so that demonstrates the ability to hold the property as an investment.I’d assume that we would need to enter into a shared equity financing arrangement whereby I will provide the initial capital contribution via my 1031 exchange and my son will assume all financing and operating costs in an ownership percentage based on the overall consideration given.

Or do what I would do, arrange for a face to face meeting. 

:) @Scott D Burrows said it best, you will need legal council for that question, however my  non legal advice would be if you draft a promissory note and arrange the terms for how the money is to be used and disbursed you should be ok ..

Arranging expensive legal documents such as a Private Placement Memorandum is usually cost prohibitive on smaller deals as it will make up a relatively large percentage of your actual invested equity.With a small amount of investors it is usually best to structure a deal through a joint venture rather than a full syndication.