I know people who live along lakes in Texas that use the lake as the primary source, running it through a filtering/purifying system at the house before consumption.
What I have done is identified the water source and made a comment that it is not unusual for this market and condition the report with an extraordinary assumption that the water is potable. If you find out that the water source is contaminated or not filtered, etc, then you have a cost to cure, up to and including a well.
Got some in my area like that, and did like Tim...... Disclose, and assume. But I have run into a couple of lenders that will not accept it. On those rare cases, before I will give a cost to cure, they have to get the county health dept to do a well survey, and give the go ahead. Have seen many lots that would not support a well and septic system, on the same lot, due to topography or close proximity to lot lines, other buildings. etc.
One of the houses that I lived in growing up and my dad still lives there was on stream water gravity feed until 2 years ago. Was always fun during the summer the water would dry up then we would have to go down every other day to another stream and get water. He finally got tired of it and put in a shared well with two neighbors. Our water had a high concentration of iron in it and you would always see it during the heavy rains it got worse.
Sue: you have me curious--what river? Use to live a the junction of Oak Creek and the Verde---and I sure wouldn't drink that water!!! New and Agua Fria only have water when it rains, Hassayampa runs underground, so I am curious!