Estate agents frequently misdescribe the homes they are selling, such as by modifying promotional photos or falsely claiming they have central heating.
In one particularly audacious pretence the advert for a fisherman's cottage in Dungeness, Kent, failed to mention the two nuclear power stations just 100 yards away.
The damning verdict on estate agency dishonesty is included in a draft report published by the Office of Fair Trading on the state of the propertymarket.
It found that consumers are becoming increasingly open to other ways of buying and selling homes that avoid using estate agents.
Although the majority of sellers still used a high street agent, the OFT market study found that more than a third initially considered selling their home privately, using an online estate agent or selling their property at an auction.
It said there was a marked increase in interest in online estate agents compared with when it last carried out a survey on the issue in 2004.
The research found that 24 per cent of estate agents were deemed not to be complying with consumer protection laws when visited by Trading Standards.
However the study also found consumer satisfaction levels with estate agents had improved during the past five years.
Around 88 per cent of buyers and sellers said they were satisfied with the service they received from estate agents, up from 72 per cent of buyers and 74 per cent of sellers in 2004.
Heather Clayton, OFT senior director of infrastructure, said: "This is important research which updates the available evidence about the process of buying and selling a home and current and future developments in the sector.
"For example, it shows the enormous potential for new internet-based business models in home buying and selling.
"Our final report will look at, among other things, how new ways of buying and selling a home may develop in the future, whether there is scope to improve consumer protection enforcement, consumer awareness of potential pitfalls in the process and ancillary services sold by estate agents."
The OFT plans to publish its final report into the home buying market early next year
