Certainly it's quite likely that it will lose you some sales -- but that's really the point, isn't it? You don't want a customer who is bothered by that stuff to win one of your auctions anyway as it would probably just mean a lot of post-auction hassle.
Also, I understand smoke-free but is pet-free really a big deal? Are a lot of people so allergic to animals that they could be bothered by whatever makes its way into a package?
I guess the answer is yes but I don't hear this talked about much.