How Illinois Treats Tiny Homes in Real Estate Deals

 Posted on August 15, 2025 in Real Estate

As a result of the current housing crisis, tiny homes are gaining popularity, despite their size (the average tiny home is about 10 times smaller than the average home). While tiny homes are certainly more affordable, with the average price at $67,000, they cost 38 percent more per square foot than full-sized homes. Almost three-fourths of tiny homeowners have no mortgage, as compared to only 29 percent of traditional homeowners with no mortgage.

The national average cost of a conventional home is $272,000. A 30-year loan at 4.25 percent interest brings the cost of that home to $481,704, which is another reason more people are considering tiny homes. If you have your eye on a tiny home, it is important that you understand how Illinois real estate law treats tiny homes – from zoning and financing, to buying, selling, and property classification.

In Illinois, the legal and real estate treatment of tiny homes is far from simple because these homes rarely fit neatly into traditional real estate categories. When you have an experienced Lake Forest, IL real estate lawyer working with you, you can rest easy, knowing you will not make a real estate mistake that is hard to come back from.

What is the Definition of a Tiny Home?

There is currently no specific statewide minimum size for a tiny home; however, many Illinois municipalities follow the International Residential Code (IRC), which recommends a minimum size of 120 square feet.  Tiny homes typically have a maximum floor space of 400 square feet. Local municipalities may establish their own size and zoning requirements. Depending on the classification of the tiny home and whether it is a part of a larger manufactured home community, it may require a seal issued by the Illinois Department of Health (430 ILCS 117/).

Real Property vs. Personal Property Classification

One significant issue to be aware of is whether a tiny home is treated as personal property or real estate. In most cases, a tiny home on a permanent foundation is considered real estate and is subject to annual property taxes. A tiny home on wheels may be classified as personal property. Unlike some states, Illinois does not charge personal yearly property taxes on vehicles.  

Key Challenges When Buying or Selling a Tiny Home  

Whether buying or selling, marketing tiny homes is a niche pool that may come with challenges. Many tiny homes will not meet the minimum size requirement or loan amount for conventional mortgages. Lenders often require homes to be on a permanent foundation, which excludes tiny homes on wheels.

Some lenders could be hesitant to offer tiny home mortgages due to perceived lower collateral value and potential resale difficulties. Even obtaining an appraisal on a tiny home can be challenging because the lack of comparable sales data can make an accurate appraisal difficult, if not impossible. Insuring the tiny home can also bring challenges, but fewer if it is certified by NOAH or RVIA.    

Tips For Purchasing a Tiny Home

Research local ordinances on tiny homes before you make an offer, and work with a real estate agent and a real estate attorney experienced in non-traditional housing. Ensure that contracts clearly describe the classification and land arrangements of the tiny home. If financing, be aware that traditional mortgages may not be suitable or available.  

Have the tiny home professionally inspected, and ensure the seller can transfer the title and that the home is appropriately registered, if on wheels. If the tiny home is on wheels and you plan to move it, factor in the costs of transporting it, site preparation, and utility connections. Tiny home living requires adjustments, so be sure to research the lifestyle thoroughly.  

Contact a Lake County, IL Real Estate Lawyer

If you are considering a tiny home, ensure you enter the purchase with your eyes wide open. A Grayslake, IL residential real estate attorney from Newland & Newland, LLP can help you navigate this type of real estate purchase. Our attorneys have decades of combined experience, are local to Illinois, and always prioritize their clients and communities. Call 847-549-0000 to schedule your free consultation.