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According to MSDN:

If the SQL Server service is running as a built-in account, such as Local System, Local Service, or Network Service, or a nondomain account, you must use certificates for endpoint authentication, and the Add New Replica wizard will be unable to create a database mirroring endpoint on the server instance. In this case, we recommend that you create the database mirroring endpoints manually before you launch the Add Replica to Availability Group Wizard.

The below message is displayed when we try to add replica with a nondomain account:

The Endpoints tab lists at least one endpoint that uses only Windows Authentication. However, the server instance might be running under a nondomain account. To use the listed endpoint, change the corresponding SQL Server service account to a domain account. To continue using the nondomain account, alter the endpoint to use a certificate. Do you want to use the listed endpoints?

One way to get around this issue without actually using a domain account is to grant access to the built-in account using the below script.

GRANT CONNECT ON endpoint::hadr_endpoint
TO [domain\servername$]

Note: If you do not have a end point, then you might have to create one for database mirroring as below.

CREATE ENDPOINT [Hadr_endpoint]
	STATE=STARTED
	AS TCP (LISTENER_PORT = 5022, LISTENER_IP = ALL)
	FOR DATA_MIRRORING (ROLE = ALL
, AUTHENTICATION = WINDOWS NEGOTIATE
, ENCRYPTION = REQUIRED ALGORITHM AES)

While I do not recommend you to use non domain account to configure AlwaysOn but this quick work around will get you through the blocking especially when you are configuring AlwaysOn for testing purposes.

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