Can a builder or seller allow a buyer an allowance to buy there own appliances, carpet, window treatments etc?

Yes and no. Sellers, Realtors and builders in a particular transaction are considered interested parties. Interested parties can contribute to the buyer but there are limits and restrictions. Some are based on the amount of down payment and some limit the type of things that the interested party can contribute.

The two types are Financing Concessions and Seller Concessions. The main difference it that Seller concessions are considered an inducement to buy and will effect the loan to value of an transaction. For example for a home purchase of $100,000 with a 5% down payment, if a seller wanted to allow the buyer a $3000 or 3% credit to buy appliances the effective loan to value would go from 95% to 98% and would require more funds to close.

Financing Concessions
Financing concessions that are paid on the borrower’s behalf are subject to Fannie Mae’s IPC limits. Financing concessions are:
financial contributions from interested parties that provide a benefit to the borrower in the financing transaction;
payments or credits related to acquiring the property; and
payments or credits for financing terms, including prepaids.
Typical fees and/or closing costs paid by a seller in accordance with local custom, known as common and customary fees or costs, are not subject to Fannie Mae IPC limits. Payoff of a PACE loan by a seller is not subject to Fannie Mae IPC limits because it is not a financing concession. Financing concessions that exceed the limits listed below are considered sales concessions and are subject to Fannie Mae IPC limits.

Financing concessions typically include origination fees, discount points, commitment fees, appraisal costs, transfer taxes, stamps, attorneys’ fees, survey charges, title insurance premiums or charges, real estate tax service fees, and funds to subsidize a temporary or permanent interest rate buydown (if these fees are not considered common and customary fees or costs based on local custom, as described above). Financing concessions can also include prepaid items, such as:
interest charges (limited to no more than 30 days of interest);
real estate taxes covering any period after the settlement date (only if the taxes are being impounded by the servicer for future payment);
property insurance premiums (limited to no more than 14 months);
homeowners’ association (HOA) assessments covering any period after the settlement date (limited to no more than 12 months);
initial and/or renewal mortgage insurance premiums; and
escrow accruals required for renewal of borrower-purchased mortgage insurance coverage.

Sales Concessions
Sales concessions are IPCs that take the form of non-realty items. They include cash, furniture, automobiles, decorator allowances, moving costs, and other giveaways, as well as financing concessions that exceed Fannie Mae limits. Consequently, the value of sales concessions must be deducted from the sales price when calculating LTV and combined LTV ratios for underwriting and eligibility purposes.