Private companies buying and selling homes from families are the real estate equivalent of parasitic clothing trucks and finance firms "preying on the most vulnerable in my view", Labour's housing spokesman warns.
Phil Twyford is calling on the Government to review the sector in order to safeguard consumers.
"When houses are being sold through a licensed real estate agent at least you've got some accountability and rules in place."
Twyford's comments follow revelations in today's Weekend Herald that a gravely ill Mangere pensioner is scrambling to save her family home of 52 years after signing it away in under three hours to a no-commission house buying company without receiving advice from her family or lawyer.
Sarah Ewe, 72, has stomach and lung cancer and was receiving chemotherapy when Auckland House Buyers sales rep Peter Lee called at her doorstep in November after she responded to an unsolicited flyer left in her letterbox.
She claims she did not realise she was signing a sale and purchase agreement for $560,000, a figure that appears to be below current market estimates.
Her family believe the company took advantage of the widowed great-grandmother to secure a cheap deal and say there is no way she gave informed consent, a claim denied by Lee.
Consumer NZ says Ewe may have grounds to challenge the sale contract and her family are now seeking urgent legal advice as the settlement date looms.
Twyford said private house buying companies appeared to be operating with little regulation and were beyond the purview of the Real Estate Agents Authority, a watchdog which monitors the activities of licensed agents.
"I call on the Minister of Consumer Affairs to take a serious look at this," Twyford said.
"These companies look to be the real estate equivalent of clothing trucks and finance companies. They're unregulated and appear to be preying on the most vulnerable.
"In an over-heated housing market people who are vulnerable are understandably tempted to cash up, and while on the face of it's no different to any other private sale, when you've got a company that's doing this systematically you have to wonder whether there's a need for a bit of accountability and some protection for consumers.
"Perhaps companies like this should be covered by the Real Estate Agents Authority legislation."
Consumer Affairs Minister Jacqui Dean acknowledged what was obviously a distressing time for Ewe and her family.
While she was unaware of the full details of the case, Dean said she was always concerned "when consumers feel they have been deceived".
She encouraged anyone concerned about their dealing with private house buying and selling companies to contact her office.
Dean said she was "more than happy to look into both the [Ewe] case and the framework surrounding it" to see if further regulation was needed to protect consumers.
"If it is an ongoing concern we would look into the wider issue."
Ewe is unsure where she will go and her family are now scrambling to get legal advice in a bid to halt the sale.
"That's how friggin' dumb I am," Ewe said through tears.
"I'm so embarrassed by what I've done."
Quotable Value estimates Ewe's house is currently worth $660,000. Three separate computer-based valuations viewed by the Weekend Herald this week put the home's worth at between $600,000 and $715,000.
Consumer NZ said the case "smacks" of unfairness and Ewe may have grounds to overturn the contract if she can prove unconscionable conduct or breach of the Fair Trading Act.
"Her best advice is talk to a lawyer," Consumer NZ chief executive Sue Chetwin said.
"She may well have grounds to stop this sale going ahead because she hasn't been properly advised."
Auckland House Buyers declined to comment, referring the matter to its lawyers.
"I don't want to say anything that can jeopardise my position," Lee told the Weekend Herald.
But in a text message to Ewe last month, Lee defended the sale process.
"At the time of the meeting we were both very clear and i invited all your family members to sit in on our meeting as well. Given property needs to be modernized (sic) and there are not agent fees involved the price is a very fair offer."
In a letter last month, Ewe's GP Mike Lovell-Smith said she was vulnerable at the time, having undergone chemotherapy and stomach cancer surgery, and a recent CT scan identifying lung cancer.
"It would be easy for people to take advantage of her in her current poor health. I hope she will be offered all the help available in dealing with the matters related to her house."
But pleas to have the sale contract voided appear to have fallen on deaf ears. Ewe is due to vacate the humble three-bedroom home next week and may have to move in with grandchildren.
Lee, the company's head buyer, turned up on Ewe's doorstep with a basket of food treats after she responded to a flyer advert delivered into her mail box earlier that day.
The flyer, endorsed by ex-Warriors league star Wairangi Koopu, promised: "For a fair offer & no agent fees, call today."
The company and its offshoot Property Wise buy homes in private sales. Its salespeople are not subject to real estate industry code of conduct rules or regulations under the Real Estate Agents Act.
Ewe claimed she queried whether her lawyer should be present and believed she was signing some sort of agency agreement.
A family friend and industry insider, who the Weekend Herald has agreed not name, said Ewe would have been under immense "emotional duress and stress" at the time.
"The price is well below the market value, she's got nowhere to go, she's a sick woman and these people have taken advantage of her."
The Real Estate Agents Authority said homeowners did not have to sell through licensed real estate agents, but had less access to redress if something went wrong in a private sale through an unlicensed salesperson.