If I had previously used the scouting service on the state a transfer is from, will he show up as level one? Or do I need to discover them in a different manner (assuming they didn’t reach out).

Unless a transfer reaches out to you, he will not automatically show up as level one. You will need to discover them another way.

If you had previously discovered all players within a certain distance (say 400 miles), you can use the assistant coach to discovery all new players within that distance and you should find all the local transfers.