In January last year, new underquoting laws came into force. These laws were designed to stop agents from deliberately understating property prices to attract as many bidders as possible.

Since then, 26 agents have been hit with a $2200 penalty, including nine in Western Sydney, five in the Inner West and three in the Inner City.

"The reason we opted for penalty infringement notices rather than prosecution was because it was either a first or minor offence," said Fair Trading Commissioner Rod Stowe.

"Many of them used terms in their advertising that are now prohibited, such as 'offers above' or 'offers over' an amount, which could underquote or obscure a property's estimated value."

Underquoting can lead to potential buyers wasting their time at an auction and wasting thousands of dollars on pest reports and solicitor's fees for a property that was always out of their budget.

Fair Trading received 266 complaints in relation to underquoting in 2016, up 13 per cent on the previous year's figure, and up 216 per cent on the 2014 figure.

Mr Stowe said the soaring number of complaints was largely caused by greater consumer awareness, and most of the complaints could not be substantiated.

"If the sale prices exceeds the price quoted in a marketing campaign, that's not underquoting, especially in this particularly heated market," he said.

But David Morrell, a buyers advocate at Morrell & Koren, called the laws "pathetic" and the penalties "a slap over the face with a wet lettuce".

He said underquoting was endemic across Australia and could only be stopped by forcing agents to publish the reserve price before an auction.

"It's hard to prove and they're getting around it by getting 'expressions of interest', so no one puts a price on anything," he said.

"If they're caught, their licences should be taken away."

At present, agents face fines of up to $22,000 and the risk of losing the commission and fees earned from the sale of an underquoted property.

A recent investigation by consumer group Choice found more than half of the 52 apartments and houses it inspected were sold for more than the maximum quoted price given by the agent.

And one-quarter were sold by over 10 per cent more than the maximum quoted price.

"Real estate agents should be able to estimate a property's value to within around 10 per cent of the sales price," said Choice's Tom Godfrey.

"One Sydney home we looked at had a price guide of $1.6 million but ultimately sold for 38 per cent more, at $2.2 million."

In November, the Victorian government passed similar underquoting laws.

But in a first, Consumer Affairs Victoria has chosen to use Australian Consumer Law rather than state laws to chase after dodgy real estate agents over misleading and deceptive conduct.

Mr Stowe said NSW was watching the case with interest, adding: "It means we've got a few more things in our toolkit."

Fair Trading officers have the power to examine sales records and other documents to determine whether an agent has breached the law.

John Cunningham, president of Real Estate Institute of NSW, believes the first year of the new laws has been "very successful".

He said coupled with real estate agent training and licensing reforms, underquoting could be stamped out.

"Firstly, I think there's a lack of understanding, secondly there's an attitude among agents that it's not important, and thirdly, there's ignorance," he said.

"Combine these three things together and it's a cocktail for abuse," he added.

Mr Cunningham believes most of the 26 agents received a penalty because they were ignorant.

"With the new laws and education campaign, ignorance and avoidance can't be used as an excuse anymore."

Tips for buyers

Look at comparable sales in the area to estimate the value of the property instead of relying on the agent's valuation

Stick to your limit and don't be tempted to pay more than you can afford for a property

Underquoting is illegal. If you think you've been underquoted, report it to your local consumer affairs organisation (for example, NSW Fair Trading)

(credit: Choice)