AI virtual staging: visual promises and the risk of misleading buyers

The context: when AI redraws the reality of listings

Last June, The Verge published an investigation into AI-based virtual staging in the US real estate market. The emblematic case is Joyce, a New Yorker looking for her first apartment on her own. After weeks of disappointing viewings, Joyce finds the perfect studio online: spacious, bright, with a fireplace and a renovated kitchen. She rushes to see it. When she arrives, she discovers the real apartment looks nothing like the images.

It's not an isolated episode. The use of AI tools to enhance and transform property photos has grown exponentially over the past two years. The problem is no longer niche: it affects millions of listings and, above all, millions of users making major decisions based on images that don't reflect reality.

The numbers that matter: how widespread and how big

According to recent data from the National Association of Realtors, over 95% of buyers and renters start their search online. As a result, listing images are the first, and often the only, point of contact before an in-person visit.

The AI virtual staging market is already worth hundreds of millions of dollars worldwide. Tools like Virtual Staging AI, REimagineHome and similar ones can turn an empty or run-down room into a polished, modern space in seconds. The cost is negligible compared with traditional virtual staging. But the speed and low cost of these tools also lower the ethical guard of the people using them.

In Europe, and in Italy in particular, the phenomenon is growing fast. Rental markets in major cities such as Milan, Rome and Bologna also have demand that structurally outstrips supply. This imbalance amplifies the impact of misleading images: under pressure, users are more vulnerable to the expectations created by unrealistic visuals.

The strategic view: why this matters to every advertiser, not just real estate

Real estate virtual staging is only the tip of the iceberg. Contrary to what you might think, the problem of misleading AI images cuts across very different verticals: e-commerce, hospitality, food, furniture, automotive. In all of these sectors, generative AI can enhance, or distort, how a product or space looks.

At SHM Studio, we work every day with companies running Google Ads campaigns and LinkedIn campaigns. We see a worrying trend: the pressure to produce eye-catching visuals on a low budget pushes teams toward AI images without proper disclosure. That choice can have serious consequences.

From a regulatory standpoint, the EU rules on unfair commercial practices and the Digital Services Act set increasingly strict requirements for transparency in commercial communications. European supervisory authorities, in particular, are paying more attention to misleading digital advertising. Using AI images that significantly alter the reality of a product or service is therefore not just a reputational risk. It's a real legal risk.

Trust erosion: the hidden cost of broken expectations

The academic research is clear. According to a study published in Harvard Business Review, broken expectations created by visual communication are one of the main drivers of brand abandonment and negative reviews. So the damage doesn't end with the single lost transaction.

In real estate, Joyce's case is a textbook example. She lost precious time. She also developed a distrust of the platform that hosted the listing. In a market like urban rentals, where platform reputation is already under pressure, every episode like this feeds a vicious circle.

Likewise, in e-commerce, a product photographed with AI that looks different from the item received leads to returns, disputes and negative reviews. The savings on photo production are largely eaten up by the operational and reputational costs that follow. So the "no one will notice" logic is a losing strategy in the medium term.

The regulatory work still in progress

On the regulatory front, the picture is changing fast. The European AI Act, in force since 2024 and being phased in, introduces transparency obligations for AI systems that generate or manipulate visual content. In particular, Article 50 of the AI Act requires artificially generated content to be labeled in a way the end user can recognize.

That said, how these rules apply in practice to real estate and advertising listings is still open to interpretation. Even so, the trend is unmistakable: disclosing the use of AI in commercial visual content will become mandatory and enforced. Companies that get ready now, with clear internal policies and visual approval processes, will gain a significant competitive edge.

In Italy, the Autorità Garante della Concorrenza e del Mercato (AGCM), the competition and market authority, has already opened proceedings on deceptive digital advertising. The Istituto dell'Autodisciplina Pubblicitaria (IAP), Italy's advertising self-regulatory body, has also updated its guidelines to include explicit references to AI-generated content. The perimeter is steadily narrowing.

What this means in practice for marketing teams

For marketing and digital managers at Italian companies, the practical implications are immediate. First, you need an audit of the visuals currently used in your campaigns: how many images were generated or significantly altered by AI? How closely do they reflect the real product or service on offer?

Next, you need a company policy on the use of generative AI in visual content. It should set clear criteria for what is acceptable, such as improving brightness or removing distracting elements, and what is not: changing dimensions, adding elements that don't exist, or substantially altering a product's features.

Finally, disclosure becomes a strategic tool, not just a legal obligation. Stating that an image was processed with AI, when it matters for the purchase decision, builds trust instead of eroding it. It also positions the brand as transparent and responsible, a value Italian consumers increasingly appreciate, as Gartner's research on consumer trust in digital marketing confirms.

From an operational standpoint, the teams working with us on SEO and copywriting already build these checks into their content production. Likewise, if you manage websites and landing pages, you need to make sure the images you publish match the real experience users will find. That's why this isn't just an advertising issue: it affects the brand's entire digital ecosystem.

What nobody tells you: the visual competitiveness paradox

One element often gets overlooked in the debate on AI virtual staging. The problem doesn't come from bad faith on the part of individual operators, but from a perverse competitive dynamic. If every listing on a platform shows bright, polished apartments thanks to AI, those who publish real photos, which may be less appealing, get penalized by the algorithm and ignored by users.

The result is a race to the bottom in visual credibility: to compete, you're forced to use increasingly elaborate images, drifting further and further from reality. As a consequence, the platforms themselves, not just individual advertisers, bear a systemic responsibility for setting standards and limits.

For companies investing in digital marketing and AI solutions, the answer isn't to give up on the technology. On the contrary, it's to use it wisely, setting an internal threshold of acceptability and communicating it transparently. This approach isn't just ethically right. It's also strategically stronger in the long run.

To dig deeper into these topics or to get an assessment of your current campaigns, the SHM Studio team is available through the contact page. You can also follow our blog, where we keep tracking regulatory developments and best practices in Italian digital marketing.