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?

Snippet answer: 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

Snippet answer: A good comparable, or comp, is a property that recently sold, is similar to the subject, is located nearby, and sold in an arm's length deal. Appraisers usually use at least three to five comps. The more similar and recent the sale, the more reliable the comparable is.

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.

Appraisers usually select at least three to five comps. The exam point is quality over quantity: a few very similar, very recent sales beat a long list of weak ones.

Making adjustments: adjust the comp, never the subject

Snippet answer: 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

Snippet answer: 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

Snippet answer: 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 both estimate a likely sale price using comparable sales. An appraisal is a formal opinion of value by a licensed appraiser who follows USPAP, the Uniform Standards of Professional Appraisal Practice. Lenders rely on an appraisal, not a CMA, to support a loan.

The Texas rules for a CMA or BPO

Snippet answer: In Texas, a license holder may prepare a CMA or BPO in the ordinary course of business, and a broker may charge a fee for it. A sales agent's CMA or BPO must be submitted in the broker's name. It cannot be called an appraisal, and TREC rules require it to carry a specific disclaimer stating it is not an appraisal under USPAP.

Texas draws a clear line between an agent's pricing work and an appraisal, and this is heavily tested.

• You may prepare one. Under the Texas Occupations Code, a license holder may prepare a CMA or BPO on the estimated price of real property. It must be done in the ordinary course of business, tied to the management, purchase, sale, or financing of an interest in real property.
• A fee is allowed. A broker may charge a fee for a CMA or BPO. A sales agent may prepare one, but it must be submitted in the sponsoring broker's name.
• It is not an appraisal. Only a licensed or certified appraiser, regulated by TALCB, can perform an appraisal. You cannot call your CMA an appraisal or an appraised value.
• A disclaimer is required. TREC rules require a set disclaimer, in at least 12-point font. It must state that the CMA or BPO is an estimated sale price, not the opinion of value from a licensed appraiser under USPAP.

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

Snippet answer: 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 required disclaimer. A sales agent may prepare one, but it is submitted in the sponsoring broker's name, and a broker may charge a fee. (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?

Yes. Under Texas rules, a broker may charge a fee for a CMA or a broker price opinion prepared in the ordinary course of business. A sales agent may prepare one, but it must be submitted in the sponsoring broker's name, since sales agents act under their broker.

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 reviewed against Texas primary sources and standard appraisal principles on July 21, 2026. The sales comparison approach, the selection of comparables, the rule that you adjust the comparable and not the subject, the direction of adjustments where a superior comparable is adjusted down and an inferior comparable is adjusted up, and the reconciliation of adjusted prices by weighting the most similar comparables, reflect settled appraisal concepts tested on the national portion of the exam. The rules that a Texas license holder may prepare a comparative market analysis or broker price opinion in the ordinary course of business, that a broker may charge a fee, that a sales agent's analysis is submitted in the broker's name, that it may not be called an appraisal, and that it must carry a required disclaimer in at least 12-point font stating it is not an appraisal under the Uniform Standards of Professional Appraisal Practice, reflect the Texas Occupations Code, including Chapter 1101 and Section 1103.005, and Texas Real Estate Commission rules. Appraisals may be performed only by an appraiser licensed or certified and regulated by the Texas Appraiser Licensing and Certification Board. Statutes, rules, and appraisal standards can change, so verify the current Texas Occupations Code and TREC and TALCB rules before relying on any point in practice.

Official Source Links

• Texas Occupations Code Chapter 1101 (Real Estate Brokers and Sales Agents)
• Texas Occupations Code Chapter 1103 (Real Estate Appraisers)
• Texas REALTORS: Broker Price Opinions
• TALCB: When Talking About Value, Choose Your Words Carefully
• TREC: Become a Real Estate Sales Agent

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.