Agents operating in your local neighbourhood have a wealth of knowledge when it comes to data like recent sales for comparable homes within your specific area, market trends and property values. This is invaluable when buying or selling.
Local lenders typically are easier to work with and are more available by phone. The big box brokerages typically have a call center and it can cause issues especially if you're in a competitive market.
The obvious first reason is that they know the area. Not just from the perspective of someone who has worked there or sold some houses there. A local realtor will know the businesses in the area as well as the schools. They will know the best dog parks and the special places where the locals like to hang out.