The Best of the Legal Hotline

Let’s face it. Artificial intelligence (AI) is everywhere. AI and other technology tools can be incredibly useful, especially in the real estate industry. AI allows agents to better serve clients and customers, creatively market services and properties, and optimize market strategies. Like with any new opportunity, agents should always use AI responsibly to remain in compliance with license law and the REALTOR^® Code of Ethics. Agents should review any AI-generated content carefully, ensure any AI-generated content is in compliance with current advertising and fair housing laws and regulations, and remember that AI is a tool, not a real estate agent.

2027 practice changes

How do the 2027 practice changes under 2025 Wisconsin Act 69 affect using technology in real estate advertising?

Effective January 1, 2027, an agent must affirmatively disclose if advertising has been “altered or modified using technology, including artificial intelligence, to add, remove, or change elements of the property, that creates a false or misleading impression of the property.”

What is the proper way to disclose if a photo for a listing has been enhanced or edited? Can it simply be disclosed in the private remarks?

The disclosure that the advertising has been altered or modified with technology must be in the advertising, so it may be prudent to include the disclosure on the altered image itself.

Where can an agent learn more about the 2027 practice changes?

To learn more about the 2027 practice changes that will advance transparency and encourage innovation, visit the WRA’s practice changes resource webpage.

Advertising

An agent attended an individual showing with a buyer who was disappointed when touring the property because it looked nothing like the pictures posted online by the listing firm. The gleaming hardwood floors in the listing photos turned out to be worn, beige carpeting in person. The online photos also seemed to hide obvious wear and tear that was readily observable in person. Additionally, the large brush pile in the backyard was magically missing from the photos.

The buyer’s agent asked the listing agent about the photo discrepancies, and the listing agent said they use AI to “enhance the property’s potential.” Nowhere was it indicated that these photos were not an accurate representation of the property’s current condition. Is this legal?

Under current law, an agent cannot advertise in a way that is false, deceptive or misleading. One could make a strong argument that the agent’s use of AI to “enhance the property’s potential” without disclosing the use of AI is false, deceptive and misleading. The buyer or the agent or both could file a complaint with the Wisconsin Department of Safety and Professional Services or the WRA’s Professional Standards Enforcement Administrator.

Starting January 1, 2027, it becomes clearer with the implementation of 2025 Wisconsin Act 69 that disclosure is required when technology materially alters a property’s appearance in marketing materials.

The listing agent has used AI to blur some personal photos of the seller and their family that are visible in the listing photos. The intent was to provide some privacy to the seller and the individuals in the photos. Nothing else in the listing photos has been altered. Is this acceptable?

Agents cannot advertise in a way that is false, deceptive or misleading. Here, it is hard to see how simply blurring the seller’s personal photos would be false, deceptive or misleading if nothing else was edited or modified regarding the property representation. However, to avoid any claim it is false, deceptive or misleading advertising, it could be disclosed that the photos were modified.

Unauthorized practice of law

An unlicensed, unrepresented buyer contacted the listing agent. The buyer does not want the listing agent to draft the offer. Furthermore, the buyer does not want to work with another agent and does not have money for an attorney. The listing agent told the buyer that the buyer can draft their own offer and use ChatGPT to draft the language. Is this allowed?

Licensees are required to use approved forms. If the buyer is not licensed, then the buyer is not required to use the WB offer to purchase. Consumers are also not required to use a licensee or an attorney for a transaction. Because the buyer is not represented, the listing agent should have provided a Disclosure to Customers form to the buyer.

The buyer may draft their own offer and submit it for the seller’s consideration. There is a concern, however, that advising the buyer to use ChatGPT to draft an offer could be seen as the unauthorized practice of law and not practicing with reasonable skill and care, which are violations of license law under Wis. Admin. Code § REEB 24.06(1) and Wis. Stat. § 452.133(1)(b). Additionally, licensees should always encourage parties to consult their own private legal counsel. Discouraging a person from retaining an attorney is a violation of license law under Wis. Admin. Code § REEB 24.06(2).

The agent has a client selling commercial property. The seller wants any potential buyer to sign a non-disclosure agreement (NDA). The seller does not have a form prepared, and the agent does not believe the document requires attorney preparation. The agent plans to use an AI tool to draft an NDA that is clear, structured and aligned with Wisconsin contract law. The agent will also encourage the buyer to have their attorney review the NDA. Can the agent use AI to draft an NDA for the parties?

There is not a WB state-approved non-disclosure agreement for use by real estate licensees. Licensees should not draft an NDA for the parties because that would be engaging in the unauthorized practice of law even when using AI as a tool. Furthermore, licensees should be aware that AI is not always perfectly accurate. Any NDA should be drafted by an attorney, and the parties should be referred to private legal counsel.

Firm supervision and office policy

An agent heard about a real estate firm using AI to review transaction documents prior to closing. A person only reviews documents that were flagged by the AI program as potentially not being compliant. Is this appropriate?

No. A firm may use AI as a tool to assist a supervising broker with the review process required by Wis. Stat. 452.132(4) but not as a replacement for the statutorily required review of transaction documents by a supervising broker.

For example, AI may be used to organize transaction documents, identify missing signatures or forms, flag incomplete trust account records, compare documents against firm checklists, or generate summaries of key transaction terms for the supervising broker’s review.

However, AI should be viewed as a supplement to and not a replacement for the supervising broker’s review obligation. The statute requires the supervising broker to review the transaction documents and trust account records before closing. While AI may help make that review more efficient and consistent, the supervising broker remains responsible for ensuring that the review is completed and that the firm’s supervisory obligations are satisfied.

Wis. Stat. 452.132(4) describes a supervising broker’s review responsibility when it comes to transaction documents:

“Wis. Stat. 452.134(4) A supervising broker for a firm, as determined under sub. (5), shall review all of the following prior to the closing of a transaction in accordance with par. (b):

1. All agency agreements, offers to purchase, leases, and other documents that are executed by the parties and records relating to the transaction that are used by a licensee associated with the firm and submitted to the firm as required under sub. (6) (b).

2. All trust account records relating to the transaction.

(b) The review under par. (a) shall be limited to confirming that a written disclosure statement to a customer or client has been provided by a licensee associated with the firm in accordance with s. 452.135, confirming that any applicable form approved by the board has been used and the forms have been completed by filling in the blanks in a manner consistent with the structure of the form, and communicating to the licensee any errors in how the forms were completed that are apparent on the face of the document and known to the person reviewing the document.”

An agent has been uploading contracts to AI to check for mistakes and to suggest additional provisions. Should the agent be inputting personal information of clients and customers into AI programs?

Agents should not be putting any personal or sensitive information into AI programs. AI can be a useful tool, but like any technology, there is a risk when using it. Adding sensitive information into AI programs carries privacy and security risks, especially with free programs or models. Agents should refrain from adding personal or sensitive information to AI programs. Agents should refer to their supervising broker and company policy whenever using AI in their practice.

With new technology and AI, should firms be including technology and AI guidance in their office policy manuals?

It would be prudent for firms to periodically review their current office policy manuals. Regular review allows firms to update their policies and procedures for changes in the industry and advancement in technology. Having a comprehensive policy for agents regarding when and how technology tools such as AI may be used helps mitigate risk and ensures diligent practice.