We are faced with the penalty of sin. The grace of God will bring salvation if we will accept it. Salvation gives us what we don't have and that which we cannot obtain on our own. It gives us what we must have to be a child of God. It gives us what we need to take us to heaven.
Sanctification is a theological term for being set apart.
Set apart from sin and set apart for service to God. It is the same word we find translated holy or holiness. The answer is that it is a work of God's grace. We cannot live the Christian life. That is we cannot live the life that God desires that we live, if we try to live it in our own power.