By Ryan Dezember, The Wall Street Journal.
Real-estate listing photos have always accentuated the positive, but computer-generated imagery of the sort Hollywood uses has now become so cheap and prolific that home sellers are taking out walls, removing ugly paneling and even adding digital swimming pools.
At the same time, photos are more important than ever: Nearly every home search begins online and deals are often struck without in-person showings, particularly among investors who are putting photos through their own algorithms to price homes as they make an unprecedented move into the U.S. housing market.
The technology allows sellers to green browned lawns, stage rooms with virtual furniture like digital dollhouses and even perform full-blown HGTV-style makeovers with clicks of a mouse.
The hazards to buyers range from disappointment when they arrive for in-person showings to blown renovation budgets. That could prove an especially thorny issue for investors, who may need to retrain computer models they use to comb through listings for houses that are good candidates to turn into rentals or flips.
Risks associated with doctored listing photos could spread beyond sight-unseen buyers. Federal rule makers are considering a proposal to open up more of the home-appraisal business to computers that generate property values partly by scraping online listing photos to gauge condition and finishes.
Redfin Corp., the discount online real-estate broker, said that 20% of 1,463 recent home buyers it surveyed in May said they had made offers on houses they had never visited. In 2017, when the market was hotter, as many as 35% of the individuals who responded to a similar study said they had made offers sight unseen, Redfin says.
HouseCanary Inc., which uses algorithms to value homes for investors, can differentiate between real homes and lifelike renderings that builders use to illustrate future construction. But its computers haven’t yet been trained to tell real interiors from fakes, said Alex Villacorta, the company’s executive vice president of data and analytics.
“We don’t have an explicit model that identifies if an image is virtually staged but that is something that our algorithms have the ability to learn,” he said.
The computer-generated images are so good these days that humans have trouble spotting them. That’s causing problems for regional broker cooperatives, known as multiple listing services, that serve as repositories for property listings and sales data.
At a recent conference for brokers in New York, an executive from property photo-editing firm BoxBrownie.com Pty Ltd. urged agents to post altered photos side-by-side with the originals. However, Peter Schravemade, the Australian firm’s strategic relationship manager, said that labeling augmented images has occasionally gotten agents in trouble while altered images without disclosures have slipped past listing-site overseers.
For $1.60 per image, BoxBrownie will punch up pictures of a house for sale, making dull skies blue, patching lawns and maybe popping photorealistic flames into fireplaces. It charges $2.40 to change wall colors and $24 to swap out flooring. Starting at $64, it will virtually renovate a room to produce a marketing image that looks realistic but nothing like the real thing.
“We’re like Photoshop on steroids,” BoxBrownie co-founder Brad Filliponi said of the popular photo-editing program.
Redfin employs a San Jose, Calif., company called roOomy to virtually stage vacant listings—right down to digital knickknacks—and says it discloses when the furniture in images is fake. “Empty homes online are not super appealing,” said Quinn Hawkins, who leads Redfin’s business unit that flips houses in Southern California and Dallas. “It’s hard to figure out where your furniture is going to fit.”
Roofstock Inc., which operates a platform on which investors buy and sell occupied rental homes, uses a service that scrubs dirty dishes and other clutter from interior photos. Rich Ford, a Roofstock founder, said erasing décor like family photos preserves tenant privacy.
Corcoran Group agent Tim Davis, who sells multimillion-dollar properties in New York’s Hamptons, virtually staged an estate in modern style in case the existing Victorian furnishings weren’t to buyers’ tastes. He posted computer-generated images alongside actual photos.
Staging homes with rented furniture is an old technique that sellers use to give potential buyers a sense of scale and how stodgy properties might look updated. Staging can cost thousands of dollars, though, so it’s usually used on luxury properties.
Virtual staging has emerged as a much cheaper option—and one that enables sellers to do far more than show what sort of furniture a room can fit.
But this also puts altered listing photos in the path of Wall Street-backed firms. Companies like Open Door Labs Inc. that are trying to perfect programmatic flipping make offers on some properties sight unseen at a computer’s recommendation. Big rental investors sometimes spit out offers for single-family homes within minutes of them hitting the market.
The ease and extent to which images can be altered has brokers and the organizations that police listings wondering where to draw the line on augmented images.
The National Association of Realtors code of ethics requires agents to present a “true picture in their advertising, marketing and other representations,” which extends to listing photos, a spokeswoman said. Donald Epley, a retired University of South Alabama real-estate professor who helped write national appraisal standards, said misleading photos are no different than fudging the square-footage or misstating the number of bedrooms in listings.
“This is a really new technology,” said Denee Evans, chief executive of the Council of Multiple Listing Services, a trade organization. “It’s just starting to bubble up questions as to where is that line.”
Ms. Evans said establishing guidelines for altered images is one of the organization’s priorities. One issue, she said, is that many listing services don’t allow images to be watermarked, which makes it difficult to ensure that disclaimers remain attached to augmented photos.
