AI Virtual Staging: Visual Promises and Risks of Misleading

The context: when AI redefines the reality of advertisements

Last June, The Verge has published an investigation on the phenomenon of AI-based virtual staging in the US real estate market. The emblematic case is that of Joyce, a New Yorker looking for her first apartment on her own. After weeks of disappointing viewings, Joyce finds the perfect study online: spacious, bright, with a fireplace and a renovated kitchen. She rushes to see it. Upon arriving at the location, she discovers that the actual apartment does not remotely match the images.

This is not an isolated incident. In fact, the adoption of AI tools for enhancing and transforming real estate photos has grown exponentially over the past two years. Therefore, the problem is no longer a niche issue: it concerns millions of listings and, more importantly, millions of users making important decisions based on images that do not reflect reality.

The Numbers That Matter: Spread and Scale of the Phenomenon

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

The AI virtual staging market is already worth hundreds of millions of dollars globally. Tools like Virtual Staging AI, REimagineHome, and similar ones allow you to transform an empty or dilapidated room into a curated, modern environment in seconds. The cost is negligible compared to traditional virtual staging. However, the speed and affordability of these tools lower the ethical threshold for those who use them.

In Europe, and in Italy in particular, the phenomenon is growing rapidly. Furthermore, the rental market in major cities — Milan, Rome, Bologna — is characterized by demand that is structurally higher than supply. This imbalance amplifies the impact of misleading images: the user, under pressure, is more vulnerable to the expectations generated by unrealistic visuals.

Strategic Reading: Why This Matters to Every Advertiser, Not Just Real Estate

Real estate virtual staging is just the tip of the iceberg. Contrary to what one might think, the problem of misleading AI images spans very different verticals: e-commerce, hospitality, food, furniture, automotive. In all these sectors, generative AI can improve—or alter—the visual perception of a product or space.

We of SHM Studio we work daily with companies that manage Google Ads campaigns e LinkedIn campaign. We are observing a concerning trend: the pressure to produce eye-catching visuals at a low cost is driving the use of AI-generated images without adequate disclosure. However, this choice can have serious consequences.

From a regulatory point of view, the EU Regulation on Unfair Commercial Practices and the Digital Services Act are imposing increasingly stringent requirements on the transparency of commercial communications. In particular, European regulatory authorities are paying closer attention to misleading digital advertising practices. Therefore, using AI-generated images that significantly distort the reality of a product or service is not just a reputational risk—it is a real legal risk.

Trust erosion: the hidden cost of unmet expectations

The academic research on this topic is clear. According to a study published in Harvard Business Review, the breaking of expectations generated by visual communications is one of the main drivers of brand abandonment and negative reviews. Therefore, the damage does not end with a single missed transaction.

In real estate, Joyce's case is exemplary. She lost valuable time. Furthermore, she developed a mistrust towards the platform hosting the listing. In a market like urban rentals, where the reputation of platforms is already under pressure, each episode of this kind fuels a vicious cycle.

Similarly, in e-commerce, a product photographed using AI that looks different from the actual item received leads to returns, complaints, and negative reviews. As a result, the savings on photography production costs are largely offset by subsequent operational and reputational costs. Therefore, the “no one will notice anyway” mindset is a losing strategy in the medium term.

The regulatory construction site is still open

On the regulatory front, the landscape is changing rapidly. The’European AI Act, entered into force in 2024 and is being progressively applied, introduces transparency obligations for AI systems that generate or manipulate visual content. In particular, Article 50 of the AI Act stipulates that artificially generated content must be labeled in a way that is recognizable to the end-user.

However, the practical application of these rules to real estate and advertising listings is still subject to interpretation. Nevertheless, the trend is unequivocal: the disclosure of AI use in commercial visual content will become mandatory and verifiable. Therefore, companies that prepare now—with clear internal policies and visual approval processes—will have a significant competitive advantage.

In Italy, the’Italian Competition and Market Authority (AGCM) It has already initiated proceedings regarding deceptive digital advertising practices. Furthermore, the Institute for Advertising Self-Regulation (IAP) has updated its guidelines to include explicit references to AI-generated content. Consequently, the scope is gradually narrowing.

Operational implications for marketing teams

For marketing and digital managers of Italian companies, the practical implications are immediate. First and foremost, an audit of the visuals currently used in campaigns is necessary: how many images have been generated or significantly altered by AI? To what extent do they reflect the reality of the product or service offered?

Subsequently, a company policy on the use of generative AI in visual content needs to be defined. This policy must include clear criteria on what is acceptable—improving brightness, removing distracting elements—and what is not: altering dimensions, adding non-existent elements, substantially modifying product characteristics.

Finally, disclosure becomes a strategic tool, not just a regulatory obligation. Indicating that an image has been processed with AI, when this is relevant to the purchase decision, builds trust rather than eroding it. Furthermore, it positions the brand as transparent and responsible—a value increasingly appreciated by Italian consumers, as confirmed by Gartner's research on Consumer Trust in Digital Marketing.

From an operational point of view, the teams working with us on SEO e copywriting they already integrate these evaluations into content production. Likewise, those who manage websites The landing page must verify the consistency between the published images and the actual experience the user will find. Therefore, the problem is not just advertising: it concerns the brand's entire digital ecosystem.

What nobody tells you: the paradox of visual competitiveness

There's an element that is often overlooked in the debate about AI virtual staging. The problem doesn't stem from bad faith on the part of individual operators, but from a perverse competitive dynamic. If all the listings on a platform show bright, well-maintained apartments thanks to AI, those who publish the real photos—perhaps less attractive ones—are penalized algorithmically and ignored by users.

This creates a race to the bottom in terms of visual credibility: to compete, one is forced to use increasingly elaborate images, gradually drifting further from reality. As a result, the platforms themselves—and not just individual advertisers—bear a systemic responsibility for setting standards and limits.

For companies investing in digital marketing and AI solutions, the answer is not to give up on technology. On the contrary, it is to use it judiciously, setting an internal threshold of acceptability and communicating it transparently. This approach is not only ethically sound—it is strategically more robust in the long run.

To delve deeper into these topics or for an evaluation of ongoing campaigns, the SHM Studio team is available through the page contacts. Furthermore, on our blog We will continue to monitor regulatory developments and best practices in Italian digital marketing.