For those having issues and getting the dreaded connection error when connecting via local IP addresses I have a fix that might work for you. In my case the game server browser connects via internet in the server browser and routes traffic through internet(out of the wan) back in my router which causes lag, latency and uses unnecessary bandwidth. In my case its using a satellite internet which causes considerable latency between 500-900ms. The game SHOULD be using the LAN connection in this case since both computers are local but it doesn't. This is the workaround.
To do this fix you will need:
Separate copies of the game for each person connecting on the LAN.
Find your IP address for the computer that will host the game. To do this go to a command prompt. You can get to it by pressing WINKEY + R and typing in cmd. When it opens type in ipconfig. Look for the IPv4 address on your network adapter. That is your IP address write it down for later.
Go to your router settings. Most routers default access IP is 192.168.1.1 in your web browser bar. Consult your router documentation for more specific info.
After you're logged into your router find the port forwarding settings in your router. Its usually under firewall.
We have to forward some ports, the exact way you do this varies from router to router. Look at the info from the manufacturer if you get stuck. Open ports 2456 and 2457 and have them go to the host PC's IP address we found before. Make sure to save your settings.
Now anyone in your LAN should be able to play latency free by connecting through the server browser as long as the same PC remains the host. Local IP direct connect still won't work, but all game traffic
Keep in mind if your local PC IP changes or someone else wants to host you will have to change the settings. Its recommended to set static IPs on the computer hosting. Keep in mind port forwarding CAN expose your network to port scans and attacks. However its still likely safer than UDnP which is enabled by default on most routers.