It is not the appraiser's duty to determine if hook up to public water is required - only to report in the appraisal the availability of connection to public and/or community water/sewer systems.
The lender is responsible for the determination of the FEASIBILITY for requiring connection.
Page D4 - Appendix D Valuation Protocol 4150.2 - http://www.hud.gov/offices/adm/hudclips/handbooks/hsgh/4150.
Also - HUD/FHA Single Family Reference Guide - Individual Water Systems - General requirements B & C
water and then can't close? You've paid that for someone else.
What does your lender say? What does the community say? If your lender
says you must, ask if you can put the money in escrow to have it done within
30 days of closing. Pay for what you own.
Am I right in guessing you aren't working with a buyers' agent?