The New Reality: AI Transparency in Real Estate
Virtual staging has transformed how real estate agents market properties. What once required expensive staging teams and physical furniture can now be created in minutes with AI. But as this technology becomes mainstream, regulators are catching up. In 2026, real estate professionals face a critical new challenge: transparency.
California’s AB 723 and emerging regulations across other states are reshaping how agents handle AI-generated and AI-edited property images. For agents using tools to virtually stage homes or enhance photos, understanding these rules isn’t optional—it’s essential. Using AI without proper disclosure can expose you to legal liability, lost client trust, and regulatory penalties.
This guide breaks down what every real estate professional needs to know about AI disclosure requirements in 2026.
California AB 723: What Agents Must Know
Starting in 2026, California’s Assembly Bill 723 establishes strict requirements for disclosing digitally altered property images. Here’s what changed:
What the law requires:
- Mandatory disclosure when images have been “materially altered” using generative AI or digital enhancement
- Clear labeling identifying which photos are AI-enhanced or virtually staged
- Consumer-friendly language so buyers understand what they’re seeing
- Documentation of which edits were made (important for compliance verification)
“Materially altered” includes:
- Virtual staging (adding or removing furniture)
- Photo enhancement (lighting adjustments, color correction beyond minor tweaks)
- Removal of defects or clutter
- Addition or removal of architectural elements
- Any change that misrepresents the property’s actual condition
The law aims to protect buyers from deceptive marketing while allowing legitimate property enhancement. The key distinction: disclosure is your shield. Transparent disclosure with proper labeling keeps you compliant.
Federal and Multi-State Guidance
Beyond California, the Federal Trade Commission (FTC) is intensifying scrutiny on AI use in advertising. Expected guidance in early 2026 will likely establish national standards for disclosing AI-generated content across industries, including real estate.
Several states are already proposing similar legislation:
- New York: Considering regulations modeled on AB 723
- Florida: Exploring AI disclosure requirements for property marketing
- Texas: Drafting transparency guidelines for digital property images
- Washington: Developing standards for virtual staging disclosure
The trend is clear: expect your state to follow California’s lead within 12-18 months.
Best Practices for Compliant AI Staging
Staying compliant doesn’t mean abandoning AI staging. It means using tools responsibly. Here’s how:
1. Choose Platforms with Compliance Features
Use AI staging tools designed with disclosure in mind. Look for platforms that make it easy to label staged images, track which photos have been altered, and generate compliance documentation. RealEstage.ai’s tools, for example, are built to help agents maintain clean records of which images are staged and which are original.
2. Implement Clear Labeling Protocols
- Label virtually staged photos with watermarks or captions: “Virtually Staged” or “AI-Enhanced”
- Use consistent labeling across all listings
- Make labels visible in all digital platforms (MLS, your website, social media)
- Include disclosure in photo descriptions
3. Document Everything
Keep detailed records of:
- Which photos were staged or enhanced
- Which AI tools were used
- What changes were made to each image
- When disclosures were added
- Client approval for AI use
This documentation protects you if compliance questions arise.
4. Get Client Buy-In
Update your listing agreements to explicitly cover AI use. Clients should understand that:
- You’ll use AI to enhance property presentation
- Disclosures will be added to virtual staging
- The process is transparent and compliant
- Benefits include faster sales and wider appeal
Transparency builds trust. Clients who understand your process are less likely to have problems with it.
5. Train Your Team
If you work with agents or photographers, ensure everyone understands:
- Disclosure requirements in your state
- How to properly label staged images
- Which edits require disclosure and which don’t
- Documentation procedures
One oversight by a team member can create compliance problems for your whole brokerage.
The Competitive Edge: Compliance as a Trust Signal
Here’s the counterintuitive advantage: transparent disclosure with proper AI staging can actually build buyer confidence. Properties with clearly labeled virtual staging often perform better than poorly presented unlabeled photos because:
- Buyers see the potential without feeling deceived
- Professional labeling signals a serious, trustworthy agent
- Virtually staged photos still attract more inquiries than low-quality originals
- The disclosure shows you’re compliant and ethical
Top agents are already using this to their advantage, positioning compliance as a sign of professionalism.
Tools and Resources for Staying Compliant
AI Staging Platforms with Compliance Support:
- RealEstage.ai offers staging tools designed with disclosure documentation built-in
- Platforms with audit trails and image metadata tracking
- Tools that generate compliance reports for your records
Legal Resources:
- California State Bar: Consumer information on AB 723
- NAR (National Association of Realtors): Developing AI disclosure guidance
- Your local real estate attorney: Review contracts and disclosure language
- Your MLS: Check for AI disclosure guidelines specific to your board
Documentation Templates: Create templates for:
- Client consent forms covering AI use
- Image disclosure statements
- Internal documentation of staged/enhanced photos
Common Mistakes to Avoid
❌ Not labeling virtually staged photos – This is the biggest compliance risk ❌ Assuming minor edits don’t need disclosure – When in doubt, disclose ❌ Using unlabeled AI enhancements on MLS – Many boards now require disclosure there specifically ❌ Forgetting to update client agreements – Your contracts should explicitly cover AI use ❌ Not documenting which tool was used – Keep records for compliance verification ❌ Mixing unlabeled and labeled photos – Be consistent across all platforms
Looking Ahead: 2026 and Beyond
The regulatory landscape is rapidly evolving. By mid-2026, expect:
- Federal FTC guidance on AI disclosure across industries
- More state legislation following California’s model
- MLS updates requiring AI disclosure protocols
- Brokerage standards becoming more stringent
- Buyer expectations shifting toward disclosure as standard
Agents who adopt compliance practices now won’t just avoid legal risk—they’ll position themselves as industry leaders.
The Bottom Line
Virtual staging is here to stay, and AI is making it more powerful than ever. But 2026 is the year transparency becomes non-negotiable. Agents who understand and implement proper disclosure practices will build stronger client relationships, avoid regulatory headaches, and gain a competitive advantage.
The technology is your tool. Compliance is your responsibility. Use both wisely, and you’ll unlock virtual staging’s full potential without the legal exposure.
Ready to stage properties the right way? Explore RealEstage.ai’s compliant virtual staging solutions designed with transparency built in. Their tools help you create stunning virtually staged images while maintaining full documentation and disclosure practices for peace of mind.