Virtual staging is one of the most powerful tools in modern real estate marketing. But in the United States, using virtually staged photos without proper disclosure can lead to MLS sanctions, ethics complaints, and even lawsuits. This guide explains exactly what you need to know about watermarks and compliance.
Why Watermarks Are Not Optional in the US
A watermark reading "Virtually Staged" or "Digitally Staged" is the single most important compliance measure you can take when using AI-enhanced real estate photos. It serves three critical purposes:
1. Legal Protection Under Federal Law
The Federal Trade Commission (FTC) enforces Truth in Advertising rules that prohibit any representation likely to mislead consumers. A virtually staged photo without disclosure could be considered deceptive advertising. Adding a visible watermark is the clearest way to avoid this risk.
2. NAR Code of Ethics Compliance
Article 12 of the National Association of Realtors (NAR) Code of Ethics requires REALTORS to present a "true picture" in all advertising. The NAR has explicitly stated that digitally modified images must be disclosed. Failure to comply can result in ethics complaints filed with your state real estate commission.
3. MLS Rules Enforcement
Nearly every MLS in the country (there are several hundred) now has specific rules about virtual staging. The vast majority require:
- A visible watermark on each staged image
- A mention in the photo caption
- A note in both public and agent remarks
- That only cosmetic changes are made (furniture, decor) with no structural alterations
Violating MLS rules can result in fines, temporary suspension from the platform, or permanent removal.
What the Law Actually Says: Federal, State, and Local Requirements
Federal Level: FTC Truth in Advertising
The FTC does not have a specific virtual staging law, but its general prohibition on deceptive advertising applies. Any image that could mislead a consumer about the condition of a property falls under FTC jurisdiction. A clear "Virtually Staged" watermark is the simplest defense.
State-Level Regulations (2026 Update)
California (AB 723 - Effective January 1, 2026)
California has passed the most comprehensive virtual staging disclosure law in the country. AB 723 requires:
- Mandatory disclosure for any AI-modified or digitally retouched real estate image
- A link or QR code allowing viewers to access the original, unmodified versions
- Non-compliance can result in criminal penalties
This law sets a precedent that other states are expected to follow.
Wisconsin (Act 69 - Effective 2027)
Wisconsin has passed legislation requiring disclosure of any technological modification to property photos. Until the law takes effect, existing MLS rules and the state's deceptive advertising statute (Wis. Stat. 452.136) already provide enforcement mechanisms.
New York
The New York Department of State requires that modified real estate images not be misleading. While there is no specific virtual staging statute, existing consumer protection laws apply.
Texas
The Texas Real Estate Commission (TREC) requires that all marketing materials be truthful and not misleading under the Texas Property Code. While no specific virtual staging statute exists, agents who fail to disclose digitally altered images risk complaints under TREC's advertising rules. Texas MLS boards, including HAR (Houston Association of Realtors) and NTREIS (North Texas), mandate watermarks on virtually staged photos.
Florida
Florida's Division of Real Estate enforces disclosure requirements through the Florida Statutes Chapter 475. Modified listing photos must not create false impressions about a property's condition. The Florida Realtors association recommends prominent watermarks on all virtually staged images, and major MLS systems like Stellar MLS and Miami MLS enforce this through their own rules.
Illinois
The Illinois Real Estate License Act requires licensees to avoid misrepresentation in all advertising. The Midwest Real Estate Data (MRED) MLS, which covers the Chicago metropolitan area, has explicit rules requiring watermarks on digitally staged images and disclosure in listing remarks.
Colorado
Colorado's Real Estate Commission has issued guidance that digitally altered property images must be clearly disclosed. REcolorado, the state's largest MLS, requires a "Virtually Staged" watermark and a notation in listing remarks for any AI-enhanced or digitally staged photos.
Other States
Most states rely on a combination of NAR Code of Ethics enforcement, local MLS rules, and general deceptive advertising statutes. The trend is clearly toward more explicit regulation. States including Arizona, Virginia, Massachusetts, and Oregon have all seen increased enforcement activity around virtual staging disclosure in 2025 and 2026.
A Closer Look: How Major MLS Systems Enforce Watermark Rules
Understanding how individual MLS systems enforce virtual staging rules is critical for agents operating across markets.
Bright MLS (Mid-Atlantic)
Serving over 100,000 agents across the Mid-Atlantic region, Bright MLS requires all virtually staged images to carry a clearly visible watermark. Violations can result in fines starting at $500 for first offenses and escalating to $2,500 for repeat violations, along with temporary listing suspension.
CRMLS (California)
The California Regional MLS, the nation's largest, has updated its rules in conjunction with AB 723. All digitally enhanced images must include watermarks, and listings must include a link to original unmodified photos. Non-compliant listings are flagged for removal within 48 hours.
Stellar MLS (Florida)
Stellar MLS requires a watermark on every virtually staged image and a disclosure statement in both public and agent remarks. Agents who fail to comply face escalating fines and potential suspension from the platform.
MRED (Illinois/Midwest)
MRED's rules require clear watermarks and disclosure in remarks. They also prohibit any structural modifications in virtually staged images, such as removing walls or adding windows.
HAR (Houston)
The Houston Association of Realtors enforces a strict watermark policy. Virtually staged images without proper disclosure are subject to immediate listing correction requests, followed by fines if not resolved within 72 hours.
What Constitutes a Proper Disclosure?
A compliant disclosure must be clear, visible, and unambiguous. Here is what best practices look like:
On the Image Itself
- A visible watermark reading "Virtually Staged", "Digitally Staged", or "Virtual Staging"
- The watermark should be legible but not obstruct the image
- Position it in a corner or along the bottom edge
- Use semi-transparent text for a professional look
- Font size should be large enough to read when the image is displayed at typical listing dimensions
- White or light text with a subtle shadow works well for visibility on most backgrounds
In the Listing
- Photo caption: "This image has been virtually staged"
- Public remarks: "Some photos in this listing have been virtually staged to show the property's potential"
- Agent remarks: "Virtual staging by [provider]. Original photos available on request"
Best Practice: Provide Original Photos
The gold standard is to include both the virtually staged version and the original, unmodified photo. This eliminates any ambiguity and builds buyer trust. California's AB 723 makes this mandatory with a link or QR code.
Real Enforcement Cases: What Happens When Agents Skip Watermarks
These real-world scenarios illustrate why compliance is non-negotiable:
Case 1: MLS Fine and Listing Suspension
A real estate agent in Southern California uploaded 12 virtually staged photos to CRMLS without watermarks. The listing was flagged within 24 hours. The agent received a $1,500 fine and a 30-day listing suspension. The seller lost three weeks of market exposure during peak selling season.
Case 2: Ethics Complaint and License Review
An agent in Texas used virtually staged images that removed visible water damage on a ceiling. A buyer purchased the property and discovered the damage during move-in. The buyer filed an ethics complaint with the Texas Real Estate Commission. The agent faced a formal license review and ultimately paid $15,000 in settlement costs.
Case 3: Buyer Lawsuit for Misrepresentation
In Florida, a buyer sued both the listing agent and the brokerage after purchasing a condo where virtually staged photos made a small bedroom appear significantly larger by digitally removing a built-in closet. The case settled for $45,000 in damages plus legal fees. The brokerage also lost its errors and omissions insurance renewal.
Case 4: Multiple Violations Leading to MLS Removal
An agent in the Chicago area received three separate violations for using unstaged photos across different listings over six months. After the third violation, MRED permanently revoked the agent's MLS access. The agent was forced to operate through a colleague's account, significantly impacting their business.
These cases demonstrate a clear pattern: enforcement is real, penalties are escalating, and the cost of non-compliance far exceeds the minor effort of adding a watermark.
What You Must NOT Do
Virtual staging should only involve cosmetic modifications. The following are prohibited:
- Altering structural elements: Do not add, remove, or modify walls, windows, doors, ceilings, or floors
- Hiding defects: Do not cover up water damage, cracks, mold, or other property issues
- Changing dimensions: Do not make rooms appear larger or smaller than they are
- Adding people: Avoid inserting people into images, which can raise Fair Housing Act concerns if it suggests a preference for certain demographics
- Removing permanent fixtures: Do not digitally remove elements that are part of the property
- Altering the view: Do not modify what is visible through windows, such as removing neighbouring buildings or adding landscaping that does not exist
- Changing flooring or wall materials: Do not replace hardwood with tile or paint over wallpaper digitally unless clearly disclosed as a renovation visualisation
How Watermarks Build Buyer Trust and Improve Your Reputation
Beyond legal compliance, watermarks serve as a trust signal that benefits your business in multiple ways:
Transparency Sells
Buyers today are more informed and skeptical than ever. When they see a "Virtually Staged" watermark, they appreciate the honesty. Studies show that transparent listings receive more inquiries because buyers trust the agent's professionalism. A watermark says: "I am showing you this property's potential, and I respect you enough to be upfront about it."
Differentiation from Competitors
In a market where some agents still cut corners, visible compliance differentiates you as a professional who takes ethics seriously. Referral business and repeat clients are built on trust, and watermarks are a visible demonstration of that commitment.
Protecting Your Brand
A single ethics complaint or lawsuit can follow you for years. Online review platforms, social media, and public records mean that compliance failures become permanent parts of your professional reputation. Prevention through proper watermarking is far cheaper than reputation repair.
Buyer Expectations Are Changing
As virtual staging becomes more common, buyers increasingly expect to see watermarks. An unmarked staged photo can actually create suspicion and distrust, as savvy buyers wonder what else might be undisclosed. Clear labelling has become a positive signal rather than a limitation.
The Future of Virtual Staging Regulation
The regulatory landscape is evolving rapidly. Here is what real estate professionals should expect in the coming years:
More States Will Follow California
California's AB 723 has set a national template. Legislative proposals modelled on AB 723 have been introduced or are being drafted in New York, Florida, Texas, Illinois, and Washington state. Within the next two to three years, explicit virtual staging disclosure laws are expected to become the norm rather than the exception.
NAR May Strengthen National Standards
The National Association of Realtors is actively reviewing its guidance on digitally modified images. Industry sources suggest that updated, more prescriptive standards could be adopted as soon as 2027, potentially requiring specific watermark formats, minimum font sizes, and standardised disclosure language.
AI Detection Tools Are Coming
MLS systems and consumer advocacy groups are developing AI-powered tools that can detect virtually staged images even without watermarks. Once these tools are widely deployed, agents who skip watermarks will face automated flagging and enforcement. Getting ahead of this trend by voluntarily watermarking all staged images is the smart move.
Consumer Lawsuits Will Increase
As buyers become more aware of virtual staging practices, class action attorneys are taking notice. The first major class action lawsuit against a brokerage for systematic non-disclosure of virtual staging could trigger an industry-wide enforcement wave.
How Lift My Place Helps You Stay Compliant
Lift My Place is built with US compliance in mind:
Built-In Watermark Tools
Our export editor lets you add a "Virtually Staged" text watermark directly onto your images before downloading. You can customise the position, size, font, and opacity to maintain a professional look while meeting disclosure requirements.
Compliance Notices for US Users
When you access Lift My Place from the US (en-US locale), you will see compliance reminders on your design pages, helping you remember to add proper disclosures before using images in listings.
Original Photo Preservation
Lift My Place always preserves your original uploaded photos alongside the staged versions. You can download both at any time, making it easy to comply with requirements to provide unmodified images.
MLS-Ready Exports with the Business Plan
Our Business plan is designed for real estate professionals who need full compliance tools. It includes the complete export editor with watermark and text overlay capabilities, letting you create MLS-compliant images in one step. With 600 transformations per month, 4K resolution, priority support, and the ability to add your own branding watermark alongside compliance text, the Business plan is the all-in-one solution for agents and brokerages who take compliance seriously.
The Real Cost of Non-Compliance
Ignoring disclosure requirements is not worth the risk:
- MLS fines: Typically $500 to $5,000 per violation, plus temporary listing suspension
- Ethics complaints: Filed with your state real estate commission, these can affect your license
- Lawsuits: Buyers who feel misled can sue for damages under deceptive advertising laws
- Reputation damage: In a referral-driven industry, one complaint can cost you years of business
- Criminal penalties: Under California's AB 723, non-compliance can result in criminal charges
- Brokerage liability: Brokerages can be held liable for agents' non-compliant listings, creating organisation-wide risk
- Insurance impact: E&O insurance claims from virtual staging disputes can increase premiums or lead to coverage denial
When you add up the potential costs, the math is clear. A $500 to $5,000 fine per violation, $10,000 to $50,000 in legal fees for a misrepresentation lawsuit, and the incalculable cost of lost referrals and reputation damage make non-compliance one of the most expensive risks in real estate today. By comparison, adding a watermark takes less than a minute.
A Simple Compliance Checklist
Before publishing any virtually staged photo, run through this checklist:
- Watermark added ("Virtually Staged" visible on the image)
- Watermark is legible at the image size used in the listing
- Photo caption mentions virtual staging
- Public remarks include virtual staging disclosure
- Agent remarks include virtual staging disclosure
- Original photos are available (ideally published alongside staged versions)
- Only cosmetic changes were made (no structural alterations)
- No property defects were hidden or obscured
- Views through windows have not been altered
- Local MLS rules have been checked and followed
- State-specific requirements have been verified
- Brokerage compliance officer has reviewed (if applicable)
Frequently Asked Questions
Can I use a small, barely visible watermark to keep photos looking clean?
No. The watermark must be clearly legible when the image is displayed at standard listing size. A watermark that is too small to read does not constitute proper disclosure and will not protect you from enforcement actions.
Do I need to watermark every single staged photo in a listing?
Yes. Each individually staged image needs its own watermark. A note in the listing remarks alone is not sufficient for most MLS systems.
What if I use virtual staging for social media but not the MLS listing?
FTC Truth in Advertising rules apply to all marketing channels, including social media, websites, and email campaigns. Watermarks are required regardless of where the image is published.
Does virtual staging count as material misrepresentation?
It can, if not properly disclosed. Disclosed virtual staging that only involves cosmetic changes (furniture, decor) is generally accepted. Undisclosed staging, or staging that hides defects or alters structural elements, can constitute material misrepresentation.
How should I handle virtual staging for international listings?
If your listing targets US buyers (published on US MLS systems or US-facing platforms), US disclosure rules apply regardless of the property's location. Always err on the side of more disclosure rather than less.
Conclusion
Virtual staging is a game-changer for real estate marketing, reducing costs by up to 97% compared to traditional staging while accelerating sales. But the power of this tool comes with a responsibility: transparency.
Adding a "Virtually Staged" watermark is not just a legal requirement. It is a mark of professionalism that builds buyer trust and protects your business. With regulations evolving rapidly, especially with California leading the way, the standard is only going to get stricter.
Lift My Place makes compliance simple. Upload your photo, generate your design, add your watermark, and publish with confidence. Your listings stay professional, your clients stay informed, and your business stays protected.
The Business plan from Lift My Place gives you everything you need: 600 transformations per month, 4K exports, and the full watermark and text overlay editor to create MLS-ready images in seconds. Stop worrying about compliance and start closing deals faster.