The Washington Diplomats soccer franchise will be sold in the next two weeks, Duncan Hill, an owner and the club's general manager, said yesterday. He declined to reveal the prospective purchaser but said that he and his father Jimmy, the team's majority owner, would not be involved in the new ownership's day-to-day operation of the team.

Duncan Hill also said the league is considering merging franchises -- a development that could be discussed at a mandatory meeting of league owners starting today in Chicago -- and Washington's next club, if there is one, could be a combination of this team and another struggling franchise, such as Jacksonville, Atlanta, Portland, California, or Dallas, which has money but wants to move.

Thus, after a four-month search to find a major investor who could save the financially strapped organization, the Hills apparently have given up hope of holding ownership of the franchise for a second year here.

Duncan Hill also said, contrary to several reports, the club does have enough money to operate through the playoffs, "even if it's out of my own pocket. It's unfortunate that there have been so many malicious rumors. But I fear they will get worse in the next week."

Jimmy and Duncan, from Coventry, England, moved the Detroit Express franchise to Washington in late February after convincing minority owners and the North American Soccer League that this area had potential investors who would align with them to form a stable organization.

Madison Square Garden terminated its Diplomat franchise last fall after averaging nearly 20,000, although several thousand of those in attendance were guests of management or attended on discount tickets.

"I can tell you that my family has lost more than $1 million on this," Duncan Hill said.

The two-day league meeting is most concerned with the survival of many teams and the league. As many as seven franchises could be terminated or relocated, and such decisions could be made at these meetings. Jimmy Hill left for Chicago immediately after the Diplomats' 5-1 home victory over Toronto yesterday. He said he will return to England on Tuesday evening.

"It's probably easier to sell the team outright than to get an investor at this point," Duncan Hill said. "There will be new owners next season. There's a 75 percent chance a deal will get done in the next week to two weeks. And a couple of other teams are interested in moving here."

Hill said the asking price would be in the neighborhood of $2 million. As recently as a month ago, their asking price was $3 million.

"I guess we could wind up keeping about five percent of the thing," he said. "We've had six inquiries, two of them serious: one in New York and one in England. We've put pressure on the potential buyer to settle this thing within two weeks."

"I'm not despondent, but there have been two disappointments," Hill said of negotiations in the last month. "There was one person who could have operated two or three franchises by himself, he was so wealthy.

"Everybody seems to want a franchise in Washington," Hill continued. "But nobody in Washington wants to put money into it. It's a strange situation."

Last year, after the old franchise terminated, several teams considered moving to Washington, including Jacksonville, Dallas and Chicago. Several other teams wanted to move here in 1982, but Detroit beat them here. The Washington area is said to be in the top three soccer markets in the United States.

League officials, already troubled by too many franchises, have said there will be no more new franchises. Thus, for Washington to have a team next year, the current club would have to operate here under new ownership or an existing franchise would have to relocate.