It is not difficult to avoid prohibited transactions, just don't get into business with family!

I wanted to make sure this wasn't a prohibited transaction.

I haven't heard anyone cite any law or regulation prohibiting the assigning of an REO. 

It can also be a disaster if you were to participate in a prohibited transaction.As for speaking with a CPA, I do recommend it but it goes without saying that your CPA should be familiar with RE and qulaified plan tax implications.

They are prohibited from acting on their own.  

Does that then make it so that I am “touching the money” and making the transactions become prohibited transactions?

While you might not want them to handle the full set of final plans, it's particularly great if you want a few initial concept ideas and visualizations, which would otherwise be cost prohibitive on most smaller projects. 

The Son working for the contractor would be a huge concern to me....the prohibited transaction rule might well be triggered with this set of relationships.

If you use your Solo 401(k) to purchase real estate, I understand that there are certain prohibitions on it, such as all income must go back into the property.As far as hiring people to work on the property, from what I read there are disqualified persons and non-disqualified persons.A "friend" is listed as a non-disqualified person.

The Solo 401k's title should read as follows for example: ABC Solo 401k Trust FBO Jane Do, TrusteeIMPORTANT: The regulations prohibit the assignment of a contract first drawn up solely in the name of the Solo 401k's Trustee to the Solo 401k account.make a deposit / earnest depositWhen your self-employed 401k purchases property, your Solo 401k is required to fund any necessary deposit or earnest funds.