Texas Real Estate Sales Agent ExamReal Estate PracticeEasy
A real estate agent is preparing a Comparative Market Analysis (CMA) for a potential seller client. The agent includes a disclaimer stating that the CMA is 'not an appraisal and should not be considered as such.' Which of the following is the primary reason TREC requires this disclaimer?
- ATo ensure that the agent does not accidentally overvalue the property and mislead the seller.
- BTo inform the seller that the CMA is a marketing tool and not a legally binding valuation.
- CTo clarify that only licensed appraisers can provide an appraisal, which has a different purpose and methodology.
- DTo protect the agent from liability if the property does not sell for the estimated price.
Show answer & explanationAnswer & explanation
Correct answer: C. To clarify that only licensed appraisers can provide an appraisal, which has a different purpose and methodology.
TREC requires a disclaimer on CMAs to clearly distinguish them from appraisals. CMAs are prepared by real estate agents for marketing purposes, while appraisals are performed by licensed appraisers using a more rigorous methodology to determine a property's value for specific financial and legal transactions. The disclaimer prevents confusion regarding the document's purpose and legal standing.
Why the other options are wrong
- A. Preventing misleading valuations is important, but the fundamental reason for the disclaimer is the legal and professional distinction between a CMA and an appraisal.
- B. Although a CMA can be a marketing tool, the disclaimer's main purpose is not to label it as such, but to distinguish it from an appraisal.
- D. While liability protection is a secondary benefit, the primary reason relates to the professional distinction between agents and appraisers.
CMA vs. Appraisal Disclaimer
A Comparative Market Analysis (CMA) prepared by a real estate agent must include a disclaimer that it is not an appraisal, as per TREC regulations.
- CMAs are prepared by real estate agents.
- Appraisals are prepared by licensed appraisers.
- The disclaimer prevents confusion about the document's purpose and legal standing.
Memory trick: Clarity Makes All Real Estate Documents Legally Distinct.