Sheriff's sale: why would anyone default if they can sell on MLS?

[Bao Nguyen]

I hear stories that people have bought houses for 10 cents on the dollar at sheriff's sale/auction.  How is that possible?  

Why would a 50% equity homeowner default when he/she could put their property on the MLS at 75% market value and sell it in a week? That owner would still make out with 25% of the value and save his/her credit.

And if this were somehow possible, wouldn't the bank just bid up on this property until (say 75% of market value) and then let investors take if they still want to outbid at that point?  Why would a bank let someone outbid them at 10% market price?  or even 50% market price for that matter.  I've had banks turn down my offer of $55k on a $61k foreclosed property (and distressed!).  I can't imagine that same bank letting an investor pick up that same property at sheriff's sale for $15k or even $25k.

Let's assume we're talking about sheriff's sales for 1st liens, and not the unwanted scenarios where the sale is for the 2nd or even HOA fees.