Welcome on the forum. <img src="/ubbthreads/images/graemlins/smile.gif" alt="" />
You won't find him anywhere before doing something first:
Sneak into his house (key is south of it, use alt key to see it) and explore a bit. <img src="/ubbthreads/images/graemlins/smile.gif" alt="" />
You must find some clues in his cellar before Elrath appears.
