We discuss the central role that dust condensation plays in shaping the observational appearance of outflows from coalescing binary systems. As binaries enter into a common envelope phase or merger, they shock-heat and expel material into their surroundings. Depending on the properties of the merging system, this material can expand to the point where molecules and dust form, dramatically increasing the gas opacity. We use the existing population of Luminous Red Novae (LRNe) to constrain the thermodynamics of these ejecta, then apply our findings to the progressive obscuration of merging systems in the lead in to their coalescence. Compact progenitor stars near the main sequence or in the Hertzsprung gap along with massive progenitor stars have sufficiently hot circumstellar material to remain unobscured by dust. By contrast, more extended, low-mass giants should become completely optically obscured by dust formation in the circumbinary environment. We predict that approximately half of stellar merger and common envelope transients for solar-mass stars will be dusty, infrared-luminous sources. The dusty, infrared transients will selectively trace the population of systems that may successfully eject their common envelopes, while the unobscured, optical transients correspond to the LRNe population of stellar mergers.