Virtual staging, strictly, means adding furniture and decor to an empty room in software. The room itself, the walls, the floors, the windows, stays as photographed. That's the version buyers broadly understand, and the near universal convention is a visible label on every staged image.
What your agent described is different. Rendering cabinets and counters into a room that has neither is a representation of a future condition, and it's much closer to a builder's rendering than to staging. Many MLS systems have their own rules on altered images and required labeling, and separately, whether an image creates a misrepresentation problem depends on your state's disclosure law and on how a buyer could reasonably read it. Get the rule from your MLS in writing and run the concept past a real estate attorney in your state before it goes live, because that's a legal question rather than a photography one.
The safer version of the same idea, and what I'd expect a good listing to do, is a clearly captioned rendering shown alongside the actual current photos rather than in place of them. Buyers get the plan and nobody arrives to a room they don't recognize.
The part of this that bites renovators is the retouching in the ordinary photos. Editors routinely lift shadows, replace a flat sky, and remove a stray cord. Some will also erase a water stain on a ceiling or a crack in the driveway if nobody tells them not to. That's a condition issue you have to disclose anyway, so tell the photographer in your first email which flaws stay in the frame.
