Placing a baby with family?

My husband's baby cousin was taken away from his mother and father by social services. He was placed in the care of his aunt (his mother's sister) but was later removed when social services found that she was unfit. After the baby was removed from the aunt's home, the baby's mother requested to her lawyer that her son be placed with her other sister, my husband's mother. Her lawyer had a background check done on my mother and father-in-law, had social services do a home check, and spoke with my mother and father-in-law about the placement to make sure it was what they wanted. When they went to court, the judge denied the placement because my mother and father-in-law live out of state (the baby's mother lived in VA and my mother and father-in-law live in NC). Due to the judge denying the placement, the baby was placed in a foster home.

I know that most of the time, courts prefer to place children with family. What does being out of state have to do with placement?