We ended up doing the whole contract, signing the deal with the seller @ $180k 4bed/2bath. 

She is ready to sign over the property.

Also, we now have a for sale sign out front!

I need some assistance in determining if I can invoke the "first time homebuyer" qualified distribution and what my tax/penalty consequences will be.

A straight shooter with drive and determination. 

I've been trying to rent it for a while now and seems like a fair amount of interest but haven't got a lease signed yet.

Im determined to turn a small single family home into a student housing investment.

Setbacks are determined from that.

That may require or a short sale or not depending on their equity which you may not determine easily without that initial discussion.

If you'd like to see what we used, msg me your email and I'll send it along.Some things to consider are not paying until moved out and all keys returned, stating that the property must not be damaged or otherwise change overall condition between signing and vacancy, property must be "broom clean", all possessions left behind are forfeit and will not be held, all tenants regardless of whether they are on the lease must vacate including pets and animals.