The question arrives in an email from the escrow attorney, three weeks before closing: "Are these photos edited, or is this actually the condition of the property?"
That pause, that question mark: that is the moment an agent realizes they may have left themselves exposed.
Sarah, a single-agent brokerage in California who has been listing residential properties for eight years, had used a virtual staging tool on five photos from her latest listing. The living room looked brighter, the kitchen island had fruit arranged on it, the guest bedroom held a bed instead of boxes. The photos were good. The photos sold the showing. Two offers came in by day four.
But Sarah had not disclosed that these were virtually staged images. Not on the MLS listing. Not on any marketing material. Not on the provenance page she'd set up to track the images for compliance purposes. The tool she used didn't burn in any disclosure language. There was just the photos, and the silence where disclosure should have been.
The escrow attorney was now three weeks deep in due diligence, looking at the listing file, and the photos did not match the actual property. The furniture was gone. The walls were a different color. The lighting was different. A reasonable person could look at those images and believe the home was in a different state than the one they were about to close on. And in California, that reasonable person is exactly who AB 723 says you must disclose to.
The attorney's question was professional, but it was also direct: if these are AI-generated or significantly altered images, where is the disclosure? The listing agent is the one legally responsible for that disclosure. Not the MLS. Not the brokerage. The agent.
Sarah had two choices now: disclose retroactively and hope the buyers didn't have a claim ("I should have told you these photos were staged, and I didn't"), or claim the photos were just professionally edited and not AI-generated ("these are real photos, just brightened and color-corrected"). The second answer would be a lie. The first answer meant facing whatever the buyers decided to do with that information.
This is the moment agents do not see coming. Not when they click the "stage these rooms" button. Not when the photos look good. Not until a lawyer is reading the file and a buyer is reading the listing and something doesn't match.
What the disclosure requirement actually covers
AB 723 and the 38 other states with similar rules say this clearly: if a listing photo has been materially altered or AI-generated, the buyer must be told. Not in a watermark on the image itself. Not in a small note buried in the details. The disclosure needs to be connected to the image in a way that a reasonable person would see it at the same time they see the photo. For the specific requirements in your state, see What AB 723 actually requires on a listing photo.
How the disclosure gets missed
It's not usually carelessness. Sarah had every intention of running a compliant listing. She just didn't know, when she used the staging tool, that she would need to manage the disclosure separately. Many brokerages have not updated their systems to track which images are staged and ensure disclosure travels with them through the MLS, social media, and email marketing.
An agent uploads a virtually staged photo to Zillow. The photo doesn't carry the disclosure. They email it to another agent. Still no disclosure. They post it on Facebook. By the time it has circulated, there are five places it exists, and the disclosure is connected to zero of them. A buyer sees the image on the MLS. They see the image on social media. They never see any disclosure. The showing confirms what the listing photos implied.
And then the attorney opens the file.
What disclosure needs to look like
What Sarah needed before the question arrived was this: a process that burned the disclosure directly into the image itself, right there in the pixels, in language that the state actually required. A provenance page that proved these were the photos from this listing, edited in this way, for this reason. A trail that escrow could follow. A narrated video tour that showed the actual condition, so nobody was confused about what was staged and what was real.
Virtual Staging Disclosure: The Pitfalls That Get Agents in Trouble goes deeper into how these gaps form. The specifics of what your state requires are worth checking with your local board or attorney. But the baseline is this: if the photo is altered, the disclosure must travel with it. Not separately. Not someday. With it. Every single place it goes.
Sarah would have been fine if she had planned for disclosure before she staged the photos, not after the question arrived.
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