When listings lie: AI staging pushes real estate into an ethics gray zone

Virtual staging — once a simple tool for digitally adding furniture — is rapidly evolving into a powerful and sometimes controversial force in real estate marketing as artificial intelligence (AI) reshapes what’s possible.

To understand where the line is drawn between enhancement and misrepresentation, it helps to start with the people who enforce the rules.

Edward Zorn, vice president and general counsel at California Regional Multiple Listing Service (CRMLS), has been watching this space for years.

“I would draw your attention first to Article 12 of the NAR code of ethics, because that’s the foundational element that is then mimicked and has some very similar rules in every MLS,” he told HousingWire. “The standard is that you shall present a true picture in the advertising, marketing and representation of the listing. So, we call it the true picture standard.”

Industry data shows why virtual staging adoption is accelerating, even as concerns about accuracy grow.

According to the National Association of Realtors (NAR), 83% of buyers’ agents said staging a home made it easier for a buyer to visualize the property as a future home.

Sixty percent of buyers’ agents cited that home staging had an effect on some buyers, but not always, while 26% said that staging had an effect on most buyers’ view of the home.

Among buyers’ agents, having photos (73%), traditional physical staging (57%), videos (48%) and virtual tours (43%) available for their listings was much more or more important to their clients.

The true picture standard in practice

Zorn emphasized that the “true picture” framework applies regardless of how an image was altered.

He cited that agents have been manipulating property photos for decades using telephoto lenses and Photoshop — and offered real world examples of how buyers have used photos as evidence in claims.

In one case, a seller digitally enhanced a fire into a fireplace. The buyer later discovered a $25,000 to $30,000 chimney and flue problem that made a fire impossible.

“The buyer, using the photo as evidence in their claim, said that it was reasonable for the buyer to think that they were buying a home that they can do a fire in, because that was the picture they saw,” Zorn said. They would use that photo to support their misrepresentation or failure to disclose claim.

Another good example is a buyer closes, goes into the garage to try to turn on the really pretty exterior lights, to show the house at night. “Then they call their agent and say, ‘I can’t find the switches. Where do I set the clock for the pretty lights at night?’ [Then they find out] there are no lights. To install lights, maybe that’s $5000 or $6,000 if it’s a big home. These are cases that get settled and you don’t hear anything about after.”

An agent’s perspective

Not every agent embraces virtual staging, even as a marketing tool.

Veronique Perrin — a real estate agent at New York-based Coldwell Banker Warburg — takes a firm stance against it.

“I never use virtual staging for my listings,” she said. “I find that buyers actually resent it and respond very negatively when they feel they were deceived about what is offered. In full transparency, I have a separate staging business, so I include actual staging for free for all my exclusives.”

Perrin has also seen damage caused by misleading photos from the buyer’s side.

“Countless times, when representing buyers, we would get to a listing and wonder whether we were in the right place,” she said. “The misrepresentation is getting out of control. Disclosure about photos being virtually staged is often missing, and some of it is so well done now that you only find out when you walk in.

“Buyers get very frustrated, and I find it counterproductive. Now, I systematically speak with the listing agent before sending a buyer to any listing to make sure the photos match what is offered.”

‘The MLS is not a marketing platform’

Zorn drew a critical distinction between marketing and cooperation.

Multiple listing services, he explained, are broker cooperatives first — not marketing platforms.

“I think that’s an important distinction,” said Zorn. “Those are two very different things. Now we do, in fact, do excellent marketing and excellent distribution in the MLS. We are great at getting good information out there for people to market with, but we can’t lose sight of the fact that we are a broker cooperative.

“Putting up what [a listing] could be if you spent another $50,000, well, that’s great for marketing. That’s terrible for me as a buyer’s agent.”

He recalled a complaint from several years ago involving a Long Beach, Calif., condominium. The listing showed a “stunning view” of the Queen Mary occupying about half the photograph.

But when buyers and their agents walked onto the deck, the Queen Mary was a tiny fraction of that size.

“That’s uncooperative to the buyer’s agent,” Zorn said. “Now the buyer is in a fight with his own agent. They’re mad, saying, ‘Why did we drive all the way out here? I told you to find me something with a great view.’ They’re squinting with binoculars and they can kind of see the Queen Mary.”

Existing Rules, enforcement gaps

Zorn does not believe new laws are needed to address AI-altered listings.

He noted that California recently passed Assembly Bill 723 — requiring real estate agents and brokers to clearly disclose when listing photos are modified by AI or digital editing.

The law mandates that if an image is digitally altered [virtual staging, object removal, etc.], a disclaimer must be added and the original image must be made available.

“We don’t need new regulation or laws,” Zorn said. “We just need to enforce the rules that we have. This standard that I just expressed to you under Article 12 of the (NAR) code of ethics — and that is almost word for word in most MLS rules — works great.

Perrin is less optimistic about enforcement.

“Honestly, I am not sure how you can actually keep up with the bad behavior, especially with the world of AI,” she said. “As for adjusting my practices, again, I only do actual staging for my listings. Most of the time, I use what is there and bring in curated props and artwork, or I’ll do a quick glow up.

“This works especially well in estate situations. There is instant gratification in a coat of paint on old furniture, the use of a staple gun and some cool fabric.”

As Zorn and Perrin both make clear, a feature that looks like a great marketing idea from one side of the transaction can become a genuine problem for the other.

Without consistent enforcement, the gap between listing and reality may only widen.