Real estate listings get an AI makeover. When does it become false advertising?

Brenda Houston is a Dallas-based store designer with decades of experience working with some of the biggest names in luxury retail, including Saks Fifth Avenue, Giorgio Armani and David Yurman. 

But even her trained eye was no match for digitally altered real estate listing photos when she was searching for a New York City apartment for her 23-year-old niece and a house in San Diego for herself. 

The homes Houston visited in both cities, she told Straight Arrow, looked nothing like their online photos. 

In person, she said, what looked like wood floors were actually vinyl, beautiful views were brick walls, and rooms were too small to fit the furniture that had been digitally added. A landscaped backyard might be little more than dirt. 

“It’s all just one big illusion,” she said.

Despite her design expertise, Houston said she was fooled by altered photos. 

“It’s really hard to tell,” she said, “even for me.” 

Welcome to house hunting in the age of AI, where a fixer-upper can become an online dream home with just a few clicks.  

Now, lawmakers are starting to push back.

California and Wisconsin have passed new laws requiring disclosures in certain cases of digitally altered real estate advertising, while New York and New Jersey are considering their own restrictions.

“Even professionals cannot tell the difference between AI-created advertisements and reality,” New York Assemblywoman Linda Rosenthal, who introduced a New York bill, told Straight Arrow News.

“And if we’re gonna be making these important life decisions based on fiction, then people need to know that.” 

Real estate tricks get an AI upgrade

Embellishing real estate listings is nothing new, but AI is taking the practice to a new level.

Brokers have long used wide-angle lenses, carefully chosen lighting and photo-editing software to make properties look their best. Virtual staging, which allows agents to digitally furnish empty rooms, has been around for years. 

But now, agents and sellers can add a swimming pool, transform a rundown kitchen or make a neighboring eyesore disappear without needing professional photographers, expensive props or Photoshop skills. 

“The power of what you could do with an image is almost limitless,” said Fouad Bekkar, CEO of Coraly, a real estate technology company.

The problem, Bekkar said, is that alterations are rarely disclosed to homebuyers and renters.

Coraly analyzed roughly 40,000 primary listing images on Zillow, Redfin, Realtor.com and Homes.com during the first three months of 2026.

Nearly 11% showed evidence of digital alteration. Of those altered images, more than 90% had no visible disclosure. 

That lack of transparency worries some industry experts. 

Gitika Kaul, a realtor at Compass in the Washington, D.C., metro area, told Straight Arrow that virtual staging can help buyers visualize the possibilities of a space. 

That can include anything from digitally changing the paint color, she said, to “adding a pool in a large backyard or completely transforming a kitchen into a modern space.”

But enhanced photos should be labeled, she said, “so the consumer understands what they’re looking at.”

Marilyn Messenger, a broker associate with LoKation Real Estate in Port St. Lucie, Florida, agreed, saying AI visualizations can be helpful, but “realtors should represent their listings accurately, and that includes photos.”

“The potential for misleading buyers is much greater with AI,” Messenger told Straight Arrow, “because it is so much more powerful and easier to use” than older photo-editing technologies.

What’s legal and what crosses the line

Digitally altering real estate listing photos, in many circumstances, is generally legal. But some undisclosed alterations could run afoul of consumer protection or real estate laws if they materially misrepresent a property or mislead a buyer or renter.

“The lease and sale of real estate is governed by false advertising laws,” said Eric Goldman, a professor at Santa Clara University School of Law who teaches advertising and marketing law, “just like all other goods and services in the marketplace.” 

Goldman told Straight Arrow that most advertising photos are doctored in some way. That is nothing new or unique to real estate. 

Changing color and lighting or cropping an image are generally “considered acceptable under standard false advertising principles,” he said “and remain so even when we sprinkle some AI dust over the process.”

The line gets murkier when undisclosed edits change what reasonable buyers think is actually there. Disguising a serious defect or misrepresenting the structure of the house, for example, could amount to deceptive advertising or even fraud.

“AI does potentially make it easier for sellers to manufacture authentic looking fake content,” Goldman said. 

Still, Goldman believes existing laws are probably sufficient to police this kind of AI-generated fakery. Consumer protection laws, real estate disclosure rules and professional licensing standards, he said, already provide guardrails.

In real estate, he added, it is tough to pass off a nonexistent pool, digitally renovated kitchen or fake woodwork when buyers usually examine the property closely and bring in an independent inspector before closing.

But misleading photos are not harmless. Goldman said they can amount to a bait-and-switch, costing people time and money even if they discover the deception during a visit.

Houston can relate. 

She and her niece were “really under the gun” to find an apartment before the start of a new job. They flew in from Dallas to visit homes they saw online.  

“We wasted time running through Midtown, trying to look at all these apartments,” Houston said, “and once we got there, they looked nothing like the advertisement.” 

Houston said when she rented a New York apartment five years ago, the places looked “pretty much the same” as their online photos. 

Now, she said, a listing might show a view of the Hudson River when the window actually faced another building. Or the photo places a large bed in a room far too small to fit one, as in the side-by-side example Houston provided to Straight Arrow.

When they finally found an apartment they liked, Houston said about 30 other people were crammed inside for the showing. With little time or room to inspect it closely, they referred back to the listing photos before signing the lease.

When her niece moved in, Houston said, she found broken windows, missing screens and filthy appliances — problems she said did not appear in those photos.

States target altered real estate photos 

Lawmakers are beginning to respond. A California law took effect on Jan. 1 requiring real estate brokers and salespeople to disclose when photos of homes for sale have been altered enough to change the appearance of the property. 

Brokers can still use AI and conduct virtual staging, but they must provide a link or QR code to the original, unadulterated photograph. Routine photographic adjustments, including changes to lighting, exposure, sharpening and color balance, are generally exempt.

Wisconsin passed its own law that takes effect on Jan. 1, 2027. This law requires the disclosure of advertising altered with technology, including AI, when they create a false or misleading impression of the property. 

Meanwhile, New Jersey lawmakers are considering a measure that would go further, generally barring photos fundamentally altered by AI or other editing software while allowing some editing only with disclosures.

And in New York, the legislation would extend the disclosure requirements to rental properties. 

“New Yorkers should know whether the apartment they’re looking at is real,” New York City Mayor Zohran Mamdani wrote in a post on X earlier this month.

In July, Mamdani announced a separate plan to require disclosure of all AI-generated or digitally altered rental listing photos and videos.

“Finding a home in New York is hard enough,” Mamdani wrote, “without artificially generating more problems.” 

Rosenthal, the New York State assemblywoman, agreed, calling the apartment hunt “often like the Hunger Games.” She said deceptive listings not only waste people’s valuable time, but distort their vision of reality and “mess with their hopes and dreams.”

An unlikely ally

Lawmakers like Rosenthal have an unlikely ally: Zillow, the most visited U.S. real estate website and app.

Zillow spokeswoman Claire Carroll told Straight Arrow that the company “supports the direction” of the disclosure laws passed in California and Wisconsin, and said “proposals elsewhere underscore the need for clear expectations across the industry.”

Carroll said while the people and businesses who provide images to Zillow bear “front-line responsibility for their accuracy,” the company’s position “is that material changes to a listing image should be clearly disclosed, and where possible, shoppers should be able to see the original.”

Carroll noted that AI puts sophisticated photo-editing tools within reach of more people, which can be useful for showing a home’s potential. Zillow itself has AI features like Zillow Showcase and Zillow AI mode to help buyers and renters reimagine a space.

But, she said, “the line is whether the image still gives a shopper an honest understanding of the property.”

Redfin, Realtor.com and Homes.com, three other major U.S. home-listing sites, declined to comment to Straight Arrow.

Threat to a ‘shared reality’

For Rosenthal, misleading real estate photos are part of a much bigger problem: the growing difficulty of knowing whether what we see is real.

“AI is invading every aspect of our lives,” she said, and lawmakers are already “late to the party” in establishing guardrails.

“People want to believe what is before their eyes,” Rosenthal said. “And increasingly, they have to question whether what they see is in fact a shared reality.”

Real estate, she said, is one area where lawmakers can act now. 

“There are deeper and more nefarious ways that AI will be used to affect our lives,” she said. “But when it comes to real estate investment, housing and leases, we see what’s happening right now and we can fix it.”

Reining in misleading real estate images, she said, “is eminently doable.”

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