Should I give up on this short sale?

I have a second property of whom I lost my tenant and can't afford any longer due to paycuts, children etc.  It orginally was my residence, but I got married and could not sell it and rented it for a while.  I have not paid the Mortgage since June 2009.  I also listed it as a short sale. I have an offer on it (for over 3 months now).  I filed all the information to the bank as they wanted.  They still have not contacted me on it.  I have called and they said a negotiator is assigned but won't give me her phone number. 

 Every month, I don't pay is just adding the interest onto my current loan balance.  When do I call it quits and try to do a deed in lieu of foreclosure instead of a short sale?  My friend who is a laywer who does deeds in lieu of foreclosure, said they were better than doing a short sale.  I already know it is going to impact my credit.  I am not as concerned about that.  I am concerned about them coming after the deficiency and that my balance keeps increasing.  I can't understand if I have not paid in five months, why they are not even foreclosing?  What should I do here? Please help.  Should I give up on the short sale and do the deed in lieu?

It is hard for us to give you a definitive answer as everyone's situation is unique.

I am a realtor and can give you some info.

1) SS are generally a bear to deal with. Your waiting is normal. These banks have a huge pile of forclosures they are dealing with. Usually the bank's left hand does not know what the right is doing. Do not be surprised if the bank forcloses before you receive an answer.

2) You mention this is a second home. Banks generally will not do a SS for investment property although you may have an exemption as you said you lived there for awhile.

3) Have you tried loan modification? If you qualify as primary residence you may get some relief that way.

4) Deed in lieu has some legal and tax implications that you may not want to deal with.

You should speak with a tax attorney or CPA to discuss your situation ASAP. They can advise you of your options and which would be best for your unique situation.