Martin Luther: We are intrinsically sinners and extrinsically justified by God's declaration of the imputation of Christ's righteousness

Martin Luther explains that we are at the same time justified (right with God by His gracious legal declaration) and sinners in ourselves ("Simul Iustus et Peccator"):

The saints are intrinsically always sinners, therefore they are always extrinsically justified; but the hypocrites are intrinsically always righteous, therefore they are extrinsically always sinners….Hence, we are extrinsically righteous in so far as we are righteous not in and from ourselves and not in virtue of our works but only by God ’s regarding us so. For inasmuch as the saints are always aware of their sin and implore God for the merciful gift of his righteousness, they are for this very reason also always reckoned righteous by God. Therefore they are before themselves and in truth unrighteous, but before God they are righteous because he reckons them so on account of this confession of their sin; they are sinners in fact, but by virtue of the reckoning of the merciful God they are righteous. (Martin Luther, Lectures on Romans, 124-125 as quoted by Samuel E. Waldron, “The Meaning of Sola Fide for Luther” in Reformed Baptist Theological Review [Palmdale, CA: January 2004] Vol. 1, No. 1, 100; quoted by Brian Schwertley in his refutation of the Auburn Avenue theology)