That would appear to be the case. I've noticed that, if an item shows up as 0 in the search, that indicates that it's not in the ward/row/den you're searching in, BUT there is someone selling it in another ward/row/den. So the game will still highlight retainers that sell the item in other wards.
EDIT - Yay, post no. 150!
Edited, Dec 22nd 2010 10:40pm by GuiltyBoomerang
This doesn't seem to be true. Tested by looking for a retainer selling Apkallu Down in the Tinkerer Ward and search for it on the search utility. Since none of them were being sold in the correct ward the option to even look for Apkallu Down did not even show up. It is possible that once someone does sell them in the right place, it is added to the list and future searches will allow flagging.
It appears as though you have to have found the item with a previous search for it to show up on the list if it's not in the appropriate ward. The first few times I went to the wards after the patch in search of Buffalo Hide, there was none to be had in the Tanner's ward so it didn't show up at all. Once I found some in the appropriate ward, it has since shown up in any search I bring up for the Tanner's Ward, even if it shows the number of retainers selling it as zero.
So it would appear that the first searches you run are actually populating a search record for you and once you've found something, it will always show up for you. And once it shows up, you can set it as your search and hop from ward to ward (and even city to city) and check. I just nabbed myself two stacks of Buffalo Hide using this trick, and it's a very substantial benefit. Every LW and their dog on Istory seems to be trying to get their hands on Buffalo Hide. Nabbing two stacks in 5 minutes is a significant feat.
Great tip OP.