Well it is common sense but still many my friends did not know about this so it can help.
All items with lvl req 60 shoud be destroyed to matherials with blacksmith.
All items bellow lvl 60 req shoud be sold to merchant. Since wishful essence sells for 60igg and hoof for around 80 igg so they wont pay up for their worth.
Blue item gives exquisite essence which sells on AH for 1800-2000 igg ( which is more than item price if you sell it to merchant ) + you have chance to get nightmare tear which sells for 800 igg each.
Yellow item gives exq essence + nightmare tear which sells together for around 2700 igg
I used to sell all to merchant and my profits were 3x worse than now so it will help you a LOT.
(For lazy people just destroy all in blacksmith)