I'm looking for a word that describes a situation where you have a possibility to be either A or B but you kind of don't really go after one or the other. Then you end up in an undesirable state that's neither A or B.
I would suggest the figurative limbo — an uneasy in-between place:
2 An uncertain period of awaiting a decision or resolution; an intermediate state or condition.
‘But the decision still left them in limbo until a final decision could be made on the park's future.’
‘At the time of going to press, Sligo Airport is still sitting in limbo, as it awaits the decision of the Department of Transport's Aviation Authority.’
‘I suffered for eight months in limbo whilst awaiting the Crown Prosecution Service decision.’
Source: Lexico — limbo
You are sitting on the fence.
"Sitting on the fence" is a common idiom used in English to describe a person's lack of decisiveness, neutrality or hesitance to choose between two sides in an argument or a competition, or inability to decide due to lack of courage. This is done either in order to remain on good terms with both sides, or due to apathy regarding the situation and not wanting to choose a position with which one doesn't actually agree. As a result, someone who "sits on the fence" will maintain a neutral and non-committal view regarding any of the other parties involved. — Wikipedia
You are describing a compromise, particularly an uneasy compromise.
used to describe a situation or condition that makes people slightly worried, often because it may not continue successfully
an agreement between two sides who have different opinions, in which each side gives up something it had wanted
More generally, you choose an undesirable position somewhere between your two desirable options.