The Australian Competition & Consumer Commission has put the real estate industry on notice about misconduct.
The ABC reports an amendment to the Trade Practices Act is due to be further scrutinised by Federal Parliament next month.
The ACCC is proposing fines of more than $A1 million for companies and up to $A220,000 for individual agents that underquote, use dummy bidders at auctions and airbrush photos of properties.
The commission hopes the changes will become law next year. Chairman Graham Samuel says the crackdown has been prompted by complaints of misconduct.
He says stronger powers are needed to investigate discrepancies between the reserve price and the advertised price of some properties.
Mr Samuel says larger fines will deter agents and vendors from engaging in misleading conduct.