I don't know if "the book" would say that is a little overpriced, and I don't know prices around you. Based on prices around here that would be fine. Even if it is a tad overpriced, I doubt that would be more than a "tad" overpriced anywhere and as said before, that is a fairly rare find.
I love my 3" S&W 65LS. I really want a 3" S&W 13. I've been looking (not exclusively but I've had my eye out) for one for about 2 years now. I'm actually considering buying a 4" S&W 13 a local low volume dealer has had for about a year now (similar condition and price to what you have described) and having it cut down to 3" if I don't find one fairly soon (assuming the 4" is still around).
If you want a 3" K-frame (and if you don't have one you should) then I guess it depends on how much you want it. If it was me, and there was any way for me to drum up $350 I'd put it down with no regrets whatsoever. In fact, I'd actually consider selling or trading one of my more common guns if that was what it would take for me to get it now even if I had to lose significant money when I replaced my trade.