What Is a Decorating Allowance?

As this article explains, new home builders and sellers sometimes offer a “decorating allowance.” Simply put, a decorating allowance are extra funds that the seller is willing to give the buyer so they can make updates after they buy. Typically, this enables buyers to upgrade things like carpets, flooring and appliances and take advantage of the builder’s economies of scale.

If you’re buying, ask the seller these questions about a decorating-allowance offer:

• What terms must your offer satisfy to qualify for the decorating allowance?
• Is the allowance credited at closing and can it be applied to your closing costs?

Make sure your lender permits whatever they propose. At closing, be sure the allowance addendum is included on the HUD-1 settlement form.

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