We paid him most of the payment total and have found out that most of the code isn't functioning as we had expected. We're learning from our mistake but I'm trying to see how I can get some money back. We paid him $2,000 out of the $2,500 total. He has stopped responding completely, via text, phone, and email. He actually lives in my town and I have the address. Any suggestions on approaching him personally, sending a physical letter, or going straight to small claims court? I've tried warning him of a court case if we don't hear back and nothing has helped.
I'm assuming you are not looking to extend the business relationship, but to end it. In addition, I'll assume it's more important getting the website done than getting perhaps $500 back after a lengthy process?
As it is, the only leverage you have is somehow appealing to his professional conscience.
If the unfinished work is in a state where it could be finished by another freelancer - and you have another freelancer in mind, you could approach the non-responding freelancer and propose that the business relationship ends.
Continuing to badger a non-responding freelancer with 'when is it done' will not bring him out from hiding. He is probably embarrassed and is 'handling' it in a humanly understandable, but quite unprofessional way.
You clearly need to do something different - so this time I would send a letter signalling that you have given up on the business relationship and you now merely want the unfinished work transferred to another provider. Best case scenario: He realizes he will lose business and might actually step up. Or perhaps he'll see it as a way out and finally respond.
The bottom line: You should not focus on getting money back when the amount is in the order of $500-1000. You should focus on your long term business goal and write this off as a business expense, both financially and experience-wise.
I suggest that since he's in your city , take a time to visit him personally (in a friendly way , as nothing happened) , and try to understand why he didn't reply .. after all maybe he had some troubles and wasn't available .Anyway,I'd rather say that in your position, you should really play the role of the wise man in this conflict and don't escalate unless he does , after all you paid him and he can deny everything so chances of refunds are really small..but you can maybe convience him by being a friendly person , presenting the damage that he would be causing to you and your colleauges etc..