Sales Comparison Approach and the CMA: Texas Exam

This is the approach agents use every day, and the one the exam tests hardest in this area. It is the basis of a comparative market analysis, or CMA. Learn how to pick comparables, how to adjust them, and the Texas rules that separate a CMA from an appraisal.

What is the sales comparison approach?

The sales comparison approach estimates value by comparing the subject property to recent sales of similar properties, called comparables, and adjusting each comparable for its differences from the subject. It rests on the principle of substitution, because a buyer will not pay more than the cost of a similar substitute. It is the primary approach for homes.

The sales comparison approach, also called the market data approach, values a property by looking at what similar properties recently sold for. It is built on the principle of substitution: a buyer will not pay more for a home than the cost of an equally desirable one nearby.

This is the leading approach for houses and land, because active markets produce plenty of recent sales to compare. It is also the logic behind the three approaches to value that an appraiser reconciles, and behind every CMA an agent prepares.

Choosing comparables

A good comparable, or comp, is a property that recently sold, is similar to the subject, is located in the same competitive market, and sold in an arm's-length transaction. The appropriate number and selection depend on the assignment and available data; similarity and relevance matter more than memorizing a universal comp count.

A comparable is a recently sold property you measure the subject against. The best comps share four traits.

• Recently sold. A closed sale, not a listing, and as recent as possible so it reflects current conditions.
• Similar. Close to the subject in size, age, style, condition, and features.
• Nearby. In the same neighborhood or market area, so location is comparable.
• Arm's length. A normal sale between unrelated parties, not a gift, a foreclosure, or a sale between family.

There is no universal Texas exam rule that every analysis must use “three to five” comparables. The exam point is quality and relevance: recent, competitive, well-supported sales deserve more weight than a larger set of weak matches.

Making adjustments: adjust the comp, never the subject

In the sales comparison approach, you always adjust the comparable, never the subject, because the subject is the unknown you are valuing. If the comparable is better than the subject, subtract from its sale price. If the comparable is worse than the subject, add to its sale price. Equal features need no adjustment.

This is the single most tested idea in the whole area, so lock it in. You adjust the comparable, never the subject. The subject is the property whose value you are trying to find, so you cannot change it. You bring each comp into line with the subject instead.

The direction of the adjustment follows one rule:

A memory aid is CBS and CIA: Comp Better, Subtract; Comp Inferior, Add. The logic is that a superior comp sold for a premium the subject does not deserve, so you remove it. An inferior comp sold for less than the subject should, so you add value back.

Here is a quick example. Your subject has a two-car garage. A comparable sold for 300,000 dollars but has a three-car garage, and a garage bay is worth about 10,000 dollars. The comp is superior, so you subtract 10,000, giving an adjusted price of 290,000 dollars. The most common adjustment factors are the rights conveyed, financing terms, conditions of sale, market conditions or time, location, and physical features like size, age, and condition.

From adjusted comps to a value

After adjusting each comparable, you have several adjusted sale prices. You reconcile them into one indicated value by giving the most weight to the comps that needed the fewest and smallest adjustments. You do not simply average them, because the most similar comp is the most reliable.

Once every comp is adjusted, you have a set of adjusted sale prices that should cluster near the subject's value. The last step is to reconcile them into a single indicated value.

The key is that this is not an average. You give the most weight to the comps that were most similar to begin with, meaning the ones that needed the fewest and smallest adjustments. A comp that needed only one small tweak is far more reliable than one that needed many large ones. This mirrors the reconciliation an appraiser does across all three approaches, where judgment beats arithmetic.

CMA vs appraisal vs BPO

A CMA is a comparative market analysis an agent prepares to help price a property. A BPO is a broker price opinion, often prepared for a lender or relocation company. An appraisal is a formal value opinion by a licensed appraiser under USPAP. The CMA and BPO use comparison logic but are not appraisals.

All three use market data, but they are not the same document, and only one is an appraisal.

A CMA and a BPO estimate a likely sale price using market evidence. An appraisal is an opinion of value by a licensed or certified appraiser and, when USPAP applies, is developed and reported under the Uniform Standards of Professional Appraisal Practice. A CMA does not become an appraisal or substitute for one when an appraisal is legally or transactionally required.

The Texas rules for a CMA or BPO

In Texas, a license holder may prepare a CMA or BPO only because of an express exemption in the Appraiser Act, and that exemption has three conditions. TREC rules then add a verbatim disclaimer in at least 12-point font, and require a sales agent's analysis to be submitted in the broker's name.

Start with why an exemption is needed at all. Texas Occupations Code Section 1103.003(1) defines an appraisal as "an opinion of value," with no qualifier. Read alone, that would make every CMA an appraisal and put every sales agent in violation of Section 1103.201(a), which bars anyone from performing an appraisal of real estate without an appraiser license or certification.

The three conditions in Section 1103.004(a)(2)

The Appraiser Act does not apply to a broker licensed under Chapter 1101, or a sales agent acting under a sponsoring broker, who gives another person a written analysis, opinion, or conclusion about the estimated price of real property, if all three of these hold:

• (A) It is not referred to as an appraisal.
• (B) It is given in the ordinary course of the broker's business.
• (C) It relates to the actual or potential acquisition, disposition, encumbrance, or management of an interest in real property.

All three, not any one. The exam builds items on condition (A) because it is the one an agent breaks by accident: the word you use decides the outcome, not the arithmetic inside the document. Call the same analysis an appraisal and the exemption is gone.

What 22 TAC Section 535.17 adds

Two details in that table are the tested ones. Subsection (c) says verbatim, so paraphrasing the sentence does not comply, and it fixes a minimum type size of 12 points. Subsection (d) puts responsibility on the sponsoring broker, which is why a sales agent's CMA goes out under the broker's name.

The rule that runs the other way

Most of this topic is about what you may not do. 22 TAC Section 535.16(c) is the opposite: a license holder is obligated to provide a BPO or CMA on a property when negotiating a listing, or when offering to purchase the property for the license holder's own account as a result of contact made while acting as an agent. Buying a listing prospect's house yourself does not excuse you from pricing it for them.

One thing no rule actually says

Study guides commonly state that a Texas broker "may charge a fee" for a CMA or BPO. Neither Occupations Code Section 1103.004 nor 22 TAC Section 535.17 says anything about a fee, in either direction. It is ordinary brokerage compensation, not a rule with a citation, so do not expect an exam item to turn on it. What the rules do settle is ownership: under Section 535.17(d) the analysis goes out in the broker's name and the broker is responsible for it.

The practical habit is to describe your result as an estimated sale price or a likely list price, never an appraised value. Getting this right is part of your duties to clients and staying inside your license.

Common exam traps to remember

Sales comparison questions punish a few confusions: adjusting the subject instead of the comp, reversing the add and subtract rule, averaging the comps, and calling a CMA an appraisal.

• Adjust the comp, never the subject. The subject is what you are valuing, so you change the comparables.
• Comp better, subtract; comp inferior, add. A superior comp gets adjusted down, an inferior comp gets adjusted up.
• Do not just average the comps. Weight the most similar, least-adjusted comps most heavily.
• A CMA is not an appraisal. In Texas it must carry the required disclaimer and cannot claim an appraised value.
• A sales agent works under the broker. A CMA or BPO is submitted in the broker's name.

You can drill these against timed Texas questions in the free practice test, and look up any unfamiliar term in the Texas real estate glossary.

Original practice questions

Use these to check yourself. They are written for practice and are not copied from any real exam.

Question 1. In the sales comparison approach, a comparable sold with a pool that the subject property does not have. How do you handle the adjustment?

• A) Add the pool's value to the subject
• B) Subtract the pool's value from the comparable
• C) Add the pool's value to the comparable
• D) Make no adjustment

Answer: B. You adjust the comparable, never the subject. The comp is superior because it has a pool, so you subtract the pool's value from the comp's sale price to make it comparable to the subject. (Original question.)

Question 2. A comparable is inferior to the subject because it has a smaller lot. Which way do you adjust the comparable's sale price?

• A) Down, by subtracting
• B) Up, by adding
• C) No adjustment
• D) Adjust the subject down

Answer: B. When the comparable is inferior to the subject, you add to the comparable's price. Comp inferior, add. The comp sold for less than the subject should, so you add value back. (Original question.)

Question 3. An agent has adjusted four comparables and now has four adjusted sale prices. How should the agent reach a single indicated value?

• A) Take a simple average of the four
• B) Use only the highest price
• C) Weight the comps that needed the fewest, smallest adjustments most heavily
• D) Use only the lowest price

Answer: C. Reconciliation is not an average. The most similar comps, the ones that needed the fewest and smallest adjustments, are the most reliable and should carry the most weight. (Original question.)

Question 4. A Texas sales agent prepares a CMA for a seller. Which statement is correct under Texas rules?

• A) The agent may call it an appraisal since it uses comps
• B) It must carry a disclaimer that it is not an appraisal, and it is submitted in the broker's name
• C) A fee can never be charged for it
• D) Only an appraiser can prepare a CMA

Answer: B. A Texas CMA is not an appraisal and must include the Section 535.17(b) statement, reproduced verbatim in at least 12-point font under Section 535.17(c). A sales agent may prepare and sign one, but Section 535.17(d) requires it to be submitted in the sponsoring broker's name, and the broker is responsible for it. (Original question.)

Frequently Asked Questions

For quick answers to every common Texas exam question, see the Texas real estate exam FAQ.

What is the sales comparison approach?

The sales comparison approach estimates value by comparing the subject property to recent sales of similar properties, called comparables, and adjusting each one for its differences from the subject. It rests on the principle of substitution and is the primary approach for houses and land, where recent sales are plentiful.

Do you adjust the subject or the comparable?

You always adjust the comparable, never the subject. The subject is the property you are trying to value, so you cannot change it. You bring each comparable into line with the subject by adjusting the comparable's sale price up or down for its differences.

If a comparable is better than the subject, do you add or subtract?

You subtract. If the comparable is superior to the subject, you subtract from the comparable's sale price, because it sold for a premium the subject does not have. If the comparable is inferior, you add to it. The memory aid is comp better, subtract; comp inferior, add.

What is the difference between a CMA and an appraisal?

A CMA, or comparative market analysis, is prepared by a real estate agent to help set a list or offer price using comparable sales. An appraisal is a formal opinion of value by a licensed or certified appraiser under USPAP. In Texas, a CMA is not an appraisal and must carry a required disclaimer.

Can a Texas agent charge a fee for a CMA or BPO?

Nothing in the Appraiser Act or the TREC rules addresses a fee either way, so treat this as ordinary brokerage compensation rather than a rule you can cite. Neither Occupations Code Section 1103.004 nor 22 TAC Section 535.17 mentions charging for a CMA or BPO. What the rules do fix is who it belongs to: under Section 535.17(d) a sales agent may prepare, sign, and present one, but must submit it in the sponsoring broker's name, and the broker is responsible for it. Any compensation for it therefore runs to the broker, the same as every other fee earned for brokerage activity.

What disclaimer must a Texas CMA or BPO include?

TREC rules require a CMA or BPO to carry a set disclaimer in at least 12-point font. It must state that the analysis represents an estimated sale price for the property, and is not the same as the opinion of value in an appraisal developed by a licensed appraiser under the Uniform Standards of Professional Appraisal Practice. The disclaimer keeps a CMA clearly separate from an appraisal.

Sources and Methodology

This article was reverified against Texas primary sources and the Pearson VUE national outline on August 12, 2026. The comparison, adjustment-direction, and reconciliation concepts are national appraisal doctrine tested under property value and appraisal. Texas Occupations Code Section 1103.004(a)(2) exempts a broker or sponsored sales agent's written estimated-price analysis from the Appraiser Act only when it is not called an appraisal, is given in the ordinary course of the broker's business, and relates to an actual or potential acquisition, disposition, encumbrance, or management of a real-property interest. TREC Rules 535.16(c) and 535.17 add the required CMA situations, verbatim disclaimer, 12-point minimum, and broker-name responsibility rule. No primary source creates a universal “three to five comps” requirement, so this guide focuses on relevance rather than an invented count.

Official Source Links

• Texas Occupations Code Chapter 1101 (Real Estate Brokers and Sales Agents)
• Texas Occupations Code Chapter 1103 (Real Estate Appraisers)
• TREC Rules 535.16 and 535.17
• TALCB: When Talking About Value, Choose Your Words Carefully
• Pearson VUE Texas Real Estate Content Outlines

This post is educational content for Texas real estate sales agent candidates. It is not appraisal or legal advice. Pricing a property and the rules for a CMA or BPO depend on current Texas law and your work under a sponsoring broker, so confirm the current Texas Occupations Code and TREC and TALCB rules and consult your broker or a licensed professional before you rely on any point in a real situation.