1. The other home was, indeed, just "a few streets over" but that also put it on the edge of the neighborhood, on a busy road, with a front yard that parents wouldn't let their children plan in for fear of them running into the road where cars often travel past at 45 miles an hour. 
    
   
2. The other home was, indeed, larger -- but the entire house needed to be updated, as it had wallpaper, a dated kitchen, dated flooring, etc.
     
   
3. The other home had a basement one-car garage instead of a main level two-car garage. 
   

Furthermore, aside from all of these differences in the two houses --- the other ($350K) house is not available any longer --- and there aren't three other houses just like it that the buyer can decide to buy. 

In this case, by focusing on this one not-actually-that-similar sale, the buyer has put themselves in a situation where they might miss out on purchasing a great home because of how they are viewing the market based on one comparable sale.

THE SELLER'S STATED PERSPECTIVE

I am confident that I can sell my house for $350K.  After all, my friend owned a very similar house and he just sold it in a week, with multiple offers, for $360K!

THE LARGER CONTEXT

Just a few items...

1. Your friend's house was in a highly desirable neighborhood within walking distance to downtown Harrisonburg -- while your home is on a busy road and has train tracks directly behind it.
    
   
2. Three homes nearly identical to your home, on your street, even facing the same direction as your home, built within two years of your home, updated at the same time as your home, sold in the past three months for $320K, $325K and $330K.
    
3. You have lived a busy life over the past few years, with work, family, and other commitments and you haven't had a chance to tackle the many small maintenance and upkeep items that a home often requires.  Your friend is a retired general contractor and has spent all of his free time over the past two years fixing, replacing, and improving countless aspects of his home's interior, exterior and grounds. 
   

Again, by focusing on this one not-actually-that-similar sale, the seller has put themselves in a situation where they might miss out on selling their home because of how they are viewing the market based on one comparable sale.

The Main Takeaway

As a buyer or as a seller -- don't focus on just one comparable sale when deciding on a reasonable price to pay or to ask -- look for the larger context!