FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                Quarterly Report Pursuant to Section 13 or 15 (d)
                     of the Securities Exchange Act of 1934

For the Quarter Ended                               Commission File Number
September 30, 1996                                          0-13331


               REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP III
             (Exact Name of Registrant as specified in its Charter)

   Delaware                                             16-1234990
--------------------                         -----------------------------------
(State of Formation)                         (IRS Employer Identification No.)

2350 North Forest Road
Suite 12-A
Getzville, New York  14068
(Address of Principal Executive Office)

Registrant's Telephone Number:      (716) 636-0280


Indicate  by a check mark  whether  the  Registrant:  (1) has filed all  reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
Registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days.   Yes  X   No
                                                ---     ---

Indicate by a check mark if disclosure of delinquent  filers  pursuant to Item
405 of Regulation S-K is not contained herein,  and will not be contained,  to
the best of the  registrant's  knowledge,  in definitive  proxy or information
statements  incorporated  by  reference  in part III of this  Form 10-Q or any
amendment to this Form 10-Q.   (X)

As of March 31,  1997,  the  issuer  had  15,551  units of  limited  partnership
interest outstanding.


<PAGE>


             REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP III
             ---------------------------------------------------

                                      INDEX
                                      -----



                                                                     PAGE NO.
                                                                     --------
PART I:     FINANCIAL INFORMATION
-------     ---------------------

            Balance Sheets -
                  March 31, 1997 and December 31, 1996                  3

            Statements of Operations -
                  Three Months Ended March 31, 1997 and 1996            4

            Statements of Cash Flows -
                  Three Months Ended March 31, 1997 and 1996            5

            Statements of Partners' (Deficit) Capital -
                  Three Months Ended March 31, 1997 and 1996            6

            Notes to Financial Statements                             7 - 18


PART II:    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
-------     FINANCIAL CONDITION AND RESULTS OF
            ----------------------------------
            OPERATIONS                                               19 - 20
            ----------

















                                       -2-
<PAGE>
               REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP III
                                 BALANCE SHEETS
                      March 31, 1997 and December 31, 1996
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                         March 31,       December 31,
                                                           1997             1996
                                                           ----             ----
<S>                                                    <C>             <C>         

ASSETS

Property, at cost:
     Land                                              $    935,000    $    935,000
     Buildings and improvements                          10,032,459      10,032,459
     Furniture and fixtures                               1,481,974       1,481,974
                                                       ------------    ------------
                                                         12,449,433      12,449,433
     Less accumulated depreciation                        5,860,076       5,837,777
                                                       ------------    ------------
          Property, net                                   6,589,357       6,611,656

Investment in joint venture                                       0          25,156

Cash                                                      1,212,010       1,811,962
Cash - security deposits                                     58,129          56,086
Accounts receivable, net of allowance for doubtful
     accounts of $607,574 and $895,282, respectively         15,260              69
Mortgage costs, net of accumulated amortization
     of $219,077 and $215,272, respectively                  92,061          18,421
Other assets                                                627,629         345,871
                                                       ------------    ------------

           Total Assets                                $  8,594,446    $  8,869,221
                                                       ============    ============


LIABILITIES AND PARTNERS' (DEFICIT)

Liabilities:
     Mortgages payable                                 $  5,749,955    $  5,431,000
     Accounts payable and accrued expenses                  583,379         713,233
     Accounts payable - affiliates                           57,341         208,156
     Accrued interest                                       113,525         100,327
     Security deposits and prepaid rents                    272,584         289,671
                                                       ------------    ------------
           Total Liabilities                              6,776,784       6,742,387
                                                       ------------    ------------

Deficit investment in joint venture                          13,895               0

Partners' (Deficit) Capital:
     General partners                                      (208,943)       (199,668)
     Limited partners                                     2,026,605       2,326,502
                                                       ------------    ------------
          Total Partners' (Deficit)                       1,817,662       2,126,834
                                                       ------------    ------------

          Total Liabilities and Partners' (Deficit)    $  8,594,446    $  8,869,221
                                                       ============    ============
</TABLE>

                        See notes to financial statements


                                       -3-

<PAGE>

               REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP III
                            STATEMENTS OF OPERATIONS
                   Three Months Ended March 31, 1997 and 1996
                                   (Unaudited)

                                                    Three Months   Three Months
                                                        Ended         Ended
                                                      March 31,     March 31,
                                                        1997           1996
                                                        ----           ----

Income:
     Rental                                          $   723,947    $ 1,035,749
     Interest and other income                            63,115         94,803
                                                     -----------    -----------
     Total income                                        787,062      1,130,552
                                                     -----------    -----------

Expenses:
     Property operations                                 586,983        611,873
     Interest:
          Paid to affiliates                              26,410         35,587
          Other                                          241,969        372,550
     Depreciation and amortization                        26,104        186,902
     Administrative:
          Paid to affiliates                              73,941         69,381
          Other                                          101,776        122,081
                                                     -----------    -----------
     Total expenses                                    1,057,183      1,398,374
                                                     -----------    -----------

Loss before allocated loss from joint venture           (270,121)      (267,822)

Allocated loss from joint venture                        (39,051)        (3,525)
                                                     -----------    -----------

Net loss                                             ($  309,172)   ($  271,347)
                                                     ===========    ===========

Loss per limited partnership unit                    ($    19.28)   ($    16.93)
                                                     ===========    ===========

Distributions per limited partnership unit           $      0.00    $      0.00
                                                     ===========    ===========

Weighted average number of
     limited partnership units
     outstanding                                          15,551         15,551
                                                     ===========    ===========










                        See notes to financial statements

                                       -4-
<PAGE>

               REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP III
                            STATEMENTS OF CASH FLOWS
                   Three Months Ended March 31, 1997 and 1996
                                   (Unaudited)

                                                     Three Months   Three Months
                                                         Ended         Ended
                                                       March 31,     March 31,
                                                         1997           1996
                                                         ----           ----

Cash flow from operating activities:
     Net loss                                        ($  309,172)   ($  271,347)

Adjustments to reconcile net loss to net cash
     (used in) operating activities:
     Depreciation and amortization                        26,104        186,902
     Loss from joint venture                              39,051          3,525
Changes in operating assets and liabilities:
     Cash - security deposits                             (2,043)             0
     Accounts receivable                                 (15,191)         2,999
     Other assets                                       (281,758)       (34,368)
     Accounts payable and accrued expenses              (129,854)        59,675
     Accrued interest                                     13,198          7,984
     Security deposits and prepaid rent                  (17,087)        13,066
                                                     -----------    -----------
Net cash (used in) operating activities                 (676,752)       (31,564)
                                                     -----------    -----------

Cash flow from investing activities:
     Capital expenditures                                      0        (10,411)
     Distributions from joint venture                          0              0
                                                     -----------    -----------
Net cash (used in) investing activities                        0        (10,411)
                                                     -----------    -----------

Cash flows from financing activities:
    Cash overdraft                                             0        (32,909)
    Accounts payable - affiliates                       (150,815)       107,230
     Principal payments on mortgages and notes           (41,810)       (32,346)
     Proceeds from mortgage refinancing                  360,765              0
     Mortgage costs                                      (91,340)             0
                                                     -----------    -----------
Net cash provided by financing activities                 76,800         41,975
                                                     -----------    -----------

(Decrease) in cash                                      (599,952)             0

Cash - beginning of period                             1,811,962              0
                                                     -----------    -----------

Cash - end of period                                 $ 1,212,010    $         0
                                                     ===========    ===========


Supplemental Disclosure of Cash Flow Information:
     Cash paid for interest                          $   255,181    $   364,566
                                                     ===========    ===========




                        See notes to financial statements

                                       -5-
<PAGE>

               REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP III
                    STATEMENTS OF PARTNERS' (DEFICIT) CAPITAL
                   Three Months Ended March 31, 1997 and 1996
                                   (Unaudited)


                                     General              Limited Partners
                                     Partners          ------------------------
                                      Amount           Units           Amount
                                      ------           -----           ------

Balance, January 1, 1996           ($  427,399)          15,551     $   123,243

Net loss                                (8,140)               0        (263,206)
                                   -----------      -----------     -----------

Balance, March 31, 1996            ($  435,539)          15,551     ($  139,963)
                                   ===========      ===========     ===========


Balance, January 1, 1997           ($  199,668)          15,551     $ 2,326,502

Net loss                                (9,275)               0        (299,897)
                                   -----------      -----------     -----------

Balance, March 31, 1997            ($  208,943)          15,551     $ 2,026,605
                                   ===========      ===========     ===========




















                        See notes to financial statements



                                       -6-
<PAGE>



               REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP III
                          NOTES TO FINANCIAL STATEMENTS
                   Three Months Ended March 31, 1997 and 1996
                                   (Unaudited)


1.   GENERAL PARTNER'S DISCLOSURE
     ----------------------------

     In the opinion of the  General  Partners  of  Realmark  Property  Investors
     Limited   Partnership   III,  all   adjustments   necessary  for  the  fair
     presentation  of  the   Partnership's   financial   position,   results  of
     operations,  and changes in cash flows for the three months ended March 31,
     1997 and 1996 have been made in the  financial  statements.  The  financial
     statements are unaudited and subject to any year-end  adjustments which may
     be necessary.

2.   FORMATION AND OPERATION OF PARTNERSHIP
     --------------------------------------

     Realmark Property Investors Limited Partnership III (the "Partnership"),  a
     Delaware Limited Partnership,  was formed November 18, 1983, to invest in a
     diversified portfolio of income-producing real estate.

     In February 1984 the Partnership  commenced the public offering of units of
     limited partnership interest.  Other than matters relating to organization,
     it had no  business  activities  and,  accordingly,  had not  incurred  any
     expenses  or earned any income  until the first  interim  closing  (minimum
     closing) of the offering which occurred April 26, 1984. All items of income
     and expense arose subsequent to this date. On January 31, 1985 the offering
     was concluded,  at which time 15,551 units of limited partnership  interest
     were  outstanding.  The General Partners are Realmark  Properties,  Inc., a
     Delaware  corporation,  the corporate  General  Partner,  and Mr. Joseph M.
     Jayson,  the  individual  General  Partner.  Joseph  M.  Jayson is the sole
     shareholder of J.M. Jayson & Company,  Inc. (JMJ) and Realmark  Properties,
     Inc. is a wholly-owned subsidiary of J.M. Jayson & Company, Inc.

     Under the Partnership  agreement,  the General  Partners and affiliates can
     receive  compensation for services  rendered and reimbursement for expenses
     incurred on behalf of the Partnership.








                                       -7-
<PAGE>

     FORMATION AND OPERATION OF PARTNERSHIP (CONTINUED)
     --------------------------------------------------

     Net  income  or  loss  arising  from  the  sale  or  refinancing  shall  be
     distributed  first to the limited partners in an amount  equivalent to a 7%
     return on the average of their adjusted capital  contributions,  then in an
     amount  equal to their  capital  contributions,  then an amount equal to an
     additional 5% of the average of their adjusted capital  contributions after
     the general  partners receive a disposition fee, then to all partners in an
     amount equal to their respective positive capital balances, and finally, in
     the ratio of 87% to the limited partners and 13% to the general partners.

     Partnership  income or loss not arising from sale or  refinancing  shall be
     allocated 97% to the limited partners and 3% to the general partners.

3.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
     ------------------------------------------

     Cash
     ----

     For purposes of reporting  cash flows,  cash includes the following  items:
     cash on hand; cash in checking; and money market savings.

     Cash - security deposits
     ------------------------

     Cash - security  deposits  represents  cash on deposit in  accordance  with
     terms  of  a  U.S.  Department  of  Housing  and  Urban  Development  (HUD)
     regulatory  agreement  for  multi-family  housing  projects  under  Section
     223(f).

     Property and depreciation
     -------------------------

     Depreciation is provided using the straight-line  method over the estimated
     useful lives of the respective  assets.  Expenditures  for  maintenance and
     repairs are expensed as incurred,  and major renewals and  betterments  are
     capitalized.  The  Accelerated  Cost Recovery  System are used to calculate
     depreciation expense for tax purposes.

     Rental income
     -------------

     Leases  for  residential  properties  have  terms  of  one  year  or  less.
     Commercial leases generally have terms of one to five years.  Rental income
     is recognized on the straight-line method over the term of the lease.



                                       -8-
<PAGE>

     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
     ------------------------------------------------------

     Investment in Joint Venture
     ---------------------------

     The interest in joint venture is accounted for on the equity method.

4.   ACQUISITION AND DISPOSITION OF RENTAL PROPERTY
     ----------------------------------------------

     In August 1984 the Partnership  acquired a 112 unit apartment complex (Bryn
     Mawr) located in Ypsilanti,  Michigan for a purchase  price of  $1,833,554,
     which included  $134,857 in acquisition  fees. In 1985 the acquisition fees
     related  to  the  purchase  of  Bryn  Mawr  were  reduced  by  $18,600  and
     reallocated to properties by the Partnership that year.

     In August 1986 the Bryn Mawr Apartments  were sold for $3,110,000.  The net
     cash proceeds of  approximately  $667,000 from the sale were distributed to
     the investors on a pro rata basis.  The  Partnership  recognized a gain for
     financial  statement purposes of $1,475,313.  For income tax purposes,  the
     gain will be recognized under the installment sale method.

     In February  1985 the  Partnership  acquired a 190 unit  apartment  complex
     (Castle Dore) in Indianapolis,  Indiana for a purchase price of $4,601,233,
     which included acquisition fees of $414,279.

     In February  1985 the  Partnership  acquired a 208 unit  apartment  complex
     (Parc  Bordeaux)  in   Indianapolis,   Indiana  for  a  purchase  price  of
     $2,845,064, which included acquisition fees of $371,233.

     In December 1988 the Partnership  sold Parc Bordeaux  Apartments for a sale
     price  of  $5,300,000  which  generated  a total  net  gain  for  financial
     statement purposes of $2,338,067. For income tax purposes, the gain will be
     recognized under the installment sale method.

     In  June  1985  the  Partnership  acquired  a 200  unit  apartment  complex
     (Williamsburg South Apartments) in Atlanta, Georgia for a purchase price of
     $5,138,745, which included acquisition fees of $368,745.

     In August 1985 the Partnership acquired a 38,500 square foot office complex
     (Perrymont) in Pittsburgh, Pennsylvania for a purchase price of $2,078,697,
     which included acquisition fees of $168,697.



                                       -9-
<PAGE>

      ACQUISITION AND DISPOSITION OF RENTAL PROPERTY  (CONTINUED)

      In October  1985 the  Partnership  acquired a 130 unit  apartment  complex
     (Pleasant  Run) in  Cincinnati,  Ohio for a purchase  price of  $3,434,728,
     which included acquisition fees of $267,228.

      In December 1985 the  Partnership  acquired a 280 unit  apartment  complex
     (Ambassador Towers, formerly Cedar Ridge) in Monroeville,  Pennsylvania for
     a  purchase  price  of  $6,766,424,  which  included  acquisition  fees  of
     $646,424.

      In December 1996, the Partnership sold the  Williamsburg  South Apartments
     and  Pleasant  Run Farms  Apartments  for a sales price of  $4,831,000  and
     $3,350,000, respectively, less related fees of $93,000. The sales generated
     a total net gain of $3,501,323 for financial statement purposes.

5.   INVESTMENT IN JOINT VENTURES
     ----------------------------

     In April 1985 the  Partnership  entered  into an  agreement  and formed the
     Inducon  Joint  Venture - Amherst  (the  Joint  Venture),  for the  primary
     purpose of constructing office/warehouse buildings in Erie County, New York
     as income producing property. The site is part of the Amherst Foreign Trade
     Zone.  This is U.S.  Customs  Territory  under federal  supervision,  where
     foreign and domestic  merchandise  is brought for  storage,  manufacturing,
     salvage,  repair, exhibit,  repacking,  relabeling or re-export.  Under the
     terms of the joint venture agreement,  the Partnership supplied $545,000 of
     capital to acquire the land and undertake  initial  development  of Phase I
     and $275,000 for Phase II. The other Joint Venturer delivered and completed
     on behalf of the Joint Venture all plans,  specifications,  maps,  surveys,
     accounting pro-formas for construction, initial leasing and operations, and
     cost estimates with respect to development.

     Ownership of the Joint Venture is divided  equally  between the Partnership
     and the other Joint Venturer. The Joint Venture agreement provides that the
     Partnership will be allocated 95% of any income or loss.

     Net cash flow from the Joint Venture is to be distributed as follows:

     To the  Partnership  until  has  received  a return  of 7% per annum on its
     underwritten  syndicated  equity. To the extent a 7% return is not received
     from year to year, it will accrue and be paid from the next  available cash
     flow.



                                      -10-
<PAGE>

     INVESTMENT IN JOINT VENTURES (CONTINUED)
     ----------------------------------------

     To the  other  Joint  Venturer  in an  amount  equal  to  that  paid to the
     Partnership. No amount will accumulate in favor of the other investor.

     Any remaining amount will be divided equally.

     To the extent there are net proceeds  from any sale or  refinancing  of the
     subject  property,  the  proceeds  will be paid in the  following  order of
     priority:

     To  the  Partnership  to  the  extent  the 7%  per  annum  returned  on its
     underwritten equity is unpaid.

     Next to the  Partnership  until it has  received  an overall 9%  cumulative
     return on its underwritten equity.

     Next to the Partnership  until it has received an amount equal to its total
     underwritten  equity,  reduced by any prior distribution of sale, financing
     or refinancing proceeds.

     Next to the  Partnership  until it has received a  cumulative  20% per year
     return on its total underwritten equity.

     Thereafter   any  remaining  net  proceeds  will  be  divided  50%  to  the
     Partnership and 50% to the other joint venturer.

     A summary of the assets, liabilities and capital of the joint venture as of
     March 31, 1997 and December 31, 1996 and the results of its  operations for
     the three months ended March 31, 1997 and 1996 is as follows:













                                      -11-
<PAGE>

                         INDUCON JOINT VENTURE - AMHERST
                                 BALANCE SHEETS
                      March 31, 1997 and December 31, 1996
<TABLE>
<CAPTION>
                                                            March 31,      December 31,
                                                              1997           1996
                                                              ----           ----
<S>                                                       <C>            <C>        

ASSETS

Property, at cost:
     Land                                                 $   177,709    $   177,709
     Land improvements                                        246,232        246,232
     Buildings and improvements                             3,079,593      3,074,733
     Equipment                                                  8,466          8,466
     Furniture and fixtures                                     2,101          2,101
                                                          -----------    -----------
                                                            3,514,101      3,509,241
     Less accumulated depreciation                          1,239,213      1,205,207
                                                          -----------    -----------
          Property, net                                     2,274,888      2,304,034

Cash and cash equivalents                                           0              0
Deferred debt expense, net of accumulated
     amortization of $0 and $293,490, respectively            161,991         23,315
Other assets                                                   85,113         41,665
                                                          -----------    -----------

                 Total Assets                             $ 2,521,992    $ 2,369,014
                                                          ===========    ===========


LIABILITIES AND PARTNERS' CAPITAL

Liabilities:
     Cash overdraft                                       $   513,527    $    34,817
     Bonds payable                                                  0      1,849,245
     Mortgage payable                                       1,875,000        260,450
     Accounts payable and accrued expenses                     75,593        128,072
     Accounts payable - affiliates                             65,788         63,240
                                                          -----------    -----------
                 Total Liabilities                          2,529,908      2,335,824
                                                          -----------    -----------

Partners' Capital:
     The Partnership                                          (13,895)        25,156
     Other joint venturer                                       5,979          8,034
                                                          -----------    -----------
                Total Partners' Capital                        (7,916)        33,190
                                                          -----------    -----------

                Total Liabilities and Partners' Capital   $ 2,521,992    $ 2,369,014
                                                          ===========    ===========
</TABLE>





                                      -12-
<PAGE>

                         INDUCON JOINT VENTURE - AMHERST
                            STATEMENTS OF OPERATIONS
                   Three Months Ended March 31, 1997 and 1996

                                                       Three Months Three Months
                                                            Ended       Ended
                                                          March 31,   March 31,
                                                            1997        1996
                                                            ----        ----

Income:
     Rental                                              $ 110,206    $ 129,134
     Interest and other income                               4,165          130
                                                         ---------    ---------
     Total income                                          114,371      129,264
                                                         ---------    ---------

Expenses:
     Property operations                                    45,774       29,464
     Interest                                               41,663       46,849
     Depreciation and amortization                          35,621       43,778
     Administrative                                         32,419       12,883
                                                         ---------    ---------
     Total expenses                                        155,477      132,975
                                                         ---------    ---------

Net loss                                                 ($ 41,106)   ($  3,711)
                                                         =========    =========


Allocation of net loss:

     The Partnership                                     ($ 39,051)   ($  3,525)
     Other Joint Venturer                                   (2,055)        (186)
                                                         ---------    ---------

                                                         ($ 41,106)   ($  3,711)
                                                         =========    =========

A reconciliation  of the  Partnership's  investment in the joint venture for the
three month periods ended March 31, 1997 and 1996 is as follows:


                                                             1997         1996

Investment in joint venture - beginning of period        $  25,156    $ 167,321
Allocated loss                                             (39,051)      (3,525)
                                                         ---------    ---------

Investment in joint venture - end of period              ($ 13,895)   $ 163,796
                                                         =========    =========




                                      -13-
<PAGE>


6.   MORTGAGES AND NOTES PAYABLE
     ---------------------------

     Castle Dore
     -----------

     A  mortgage  of  $1,530,110  and  $1,562,089  at March  31,  1997 and 1996,
     respectively,  bearing interest at 7.50%. The mortgage  provides for annual
     principal  and  interest  payments  of  $216,026  payable in equal  monthly
     installments through September 1, 2014.

     Williamsburg
     ------------

     A 12.85% mortgage which provides for annual principal and interest payments
     of $341,602  payable in equal monthly  installments  through December 1999.
     The mortgage had a balance of $0 and $2,415,683 at March 31, 1997 and 1996,
     respectively.   This  property  was  sold  in  December  of  1996  and  the
     outstanding balance of the mortgage was paid in full.

     Perrymont
     ---------

     A mortgage  which  provides  for  interest  rates and monthly  installments
     through December 1998 as follows:

             Year            Rate         Payment
             ----            ----         -------

             1996            7.875%       $  9,660  (Principal and interest)
             1997 - 1998     8.50%        $ 10,187  (Principal and interest)

     The outstanding  balance at March 31, 1997 and March 31, 1996  respectively
     was $1,259,701 and $1,265,185.

     Pleasant Run
     ------------

     A 10% mortgage  with a balance of $0 and  $2,217,214  at March 31, 1997 and
     1996,  respectively providing for annual principal and interest payments of
     $245,349 payable in equal monthly installments,  with the remaining balance
     due August 1, 1998.  This  property  was sold in  December  of 1996 and the
     outstanding balance of the mortgage was paid in full.





                                      -14-
<PAGE>

     MORTGAGES AND NOTES PAYABLE (CONTINUED)
     ---------------------------------------

     Ambassador Towers (formerly Cedar Ridge)
     ----------------------------------------

     A mortgage  with a balance of $465,566  and  $559,024 at March 31, 1997 and
     1996,  respectively,  bearing interest at 7.75%. The mortgage  provides for
     monthly principal and interest payments of $8,980 through April 1, 2002.

     A mortgage  with a balance of $1,148,779  and  $1,356,255 at March 31, 1997
     and 1996,  respectively,  bearing interest at 8.75%. The mortgage  provides
     for monthly  principal and interest  payments of $20,455 through October 1,
     2003.

     A mortgage with a balance of $987,891 and  $1,000,000 at March 31, 1997 and
     1996  which  provides  for  interest  only  payments  at prime rate plus 2%
     (10.25% at March 31, 1997).  The mortgage was  originally  due in September
     1994,  but in September  1995 the General  Partner  negotiated an extension
     until May 1996. The  Partnership  has been utilizing a temporary  extension
     while it seeks refinancing for the loan.

     The  aggregate  maturities of the mortgages for each of the next five years
     and thereafter are as follows:

             Year                         Amount
             ----                         ------

             1997                         $     84,466
             1998                               95,166
             1999                            1,327,466
             2000                              119,873
             2001                              129,559
             Thereafter                      4,882,522
                                          ------------
                                             6,639,052
             Unamortized discount             (579,685)
                                          ------------
             TOTAL                        $  6,059,367
                                          ============









                                      -15-
<PAGE>

7.   RELATED PARTY TRANSACTIONS
     --------------------------

     Management fees for the management of Partnership's  properties are paid to
     an affiliate of the General Partner.  The management agreement provides for
     5% of gross monthly  rental  receipts of the complex to be paid as fees for
     administering  the operations of the property.  These fees totaled  $39,741
     and  $60,150  for  the  three   months  ended  March  31,  1997  and  1996,
     respectively.

     According to the terms of the Partnership  agreement,  the general partners
     are  entitled to receive a  Partnership  management  fee equal to 7% of net
     cash  flow  (as  defined  in the  Partnership  agreement),  2% of  which is
     subordinated to the limited  partners having received an annual cash return
     equal to 7% of their adjusted capital  contributions.  No such fee has been
     paid or accrued by the  Partnership  for the three  months  ended March 31,
     1997 and 1996.

     The general partners are also allowed to collect property  disposition fees
     upon sale of acquired  properties.  This fee is not to exceed the lesser of
     50% of amounts customarily  charged in arm's-length  transactions by others
     rendering similar services for comparable  properties or 2.75% of the sales
     price.  The  property  disposition  fee is  subordinate  to payments to the
     limited partners of a cumulative annual return (not compounded) equal to 7%
     of their average  adjusted capital balances and to repayment to the limited
     partners of an amount equal to their capital contributions.

     The general  partners have not to date  received a  disposition  fee on the
     sale of Bryn  Mawr or Parc  Bordeaux,  as the  limited  partners  have  not
     received a return of 7% on their average adjusted capital or their original
     capital as defined in the Partnership agreement.  Once the limited partners
     receive their original  capital and a 7% return,  the general partners will
     be entitled to disposition fees of 2.75%.

     Accounts  payable - affiliates  amounted to $57,341 at March 31, 1997.  The
     payable  represents fees due to the general partner or to affiliates of the
     general partner. Interest charged on amounts due affiliates totaled $26,410
     for the three month period ended March 31, 1997.









                                        -16-
<PAGE>

     RELATED PARTY TRANSACTIONS (CONTINUED)
     --------------------------------------

     Pursuant to the terms of the Partnership  agreement,  the corporate general
     partner  charges the  Partnership  for  reimbursement  of certain costs and
     expenses  incurred by the corporate  general  partner and its affiliates in
     connection with the  administration of the Partnership.  These charges were
     for the  Partnership's  allocated  share  of  costs  and  expenses  such as
     payroll, travel and communication, costs related to partnership accounting,
     and partner's communication and relations.

     Computer  service  charges  for the  Partnership  are paid or accrued to an
     affiliate  of the  General  Partner.  The fee is based  upon the  number of
     apartment  units and totaled $ 3,510 for the three  months  ended March 31,
     1997 and 1996.

8.   INCOME TAXES
     ------------

     No provision has been made for income taxes since the income or loss of the
     Partnership  is to be  included  in  the  tax  returns  of  the  individual
     partners.

     The tax returns of the  Partnership  are subject to  examination by federal
     and state  taxing  authorities.  Under  federal and state  income tax laws,
     regulations  and rulings,  certain  types of  transactions  may be accorded
     varying  interpretations  and,  accordingly,  reported  Partnership amounts
     could be changed as a result of any such examination.

     The  reconciliation of net loss for the three month periods ended March 31,
     1997 and 1996 as reported in the statements of operations,  and as would be
     reported for tax purposes respectively, is as follows:

                                                  March 31,        March 31,
                                                    1997               1996
                                                    ----               ----
      Net loss -
           Statement of operations              $  (309,172)      $  (273,214)
      (Add to)  deduct from:
           Difference in depreciation              ( 25,000)         ( 21,441)
           Difference in amortization                16,431            16,431
           Non-deductible expenses                   62,000            62,896
           Difference in loss of joint venture        8,500             1,612
                                                -----------       -----------

      Net loss for tax purposes                 $  (247,241)      $  (213,716)
                                                ===========       ===========



                                      -17-
<PAGE>

     INCOME TAXES (CONTINUED)
     ------------------------

     The  reconciliation  of partner's  (deficit)  capital at March 31, 1997 and
     December  31, 1996 as reported in the balance  sheets,  and as reported for
     tax purposes, is as follows:

                                                 March 31,        December 31,
                                                    1997               1996
                                                    ----               ----
     Partner's (Deficit) Capital -
       balance sheet                            $ 1,817,662       $ 2,126,834
       Add to (deduct from):
            Accumulated difference in
            depreciation                         (4,259,796)       (4,234,796)
            Accumulated difference in
            amortization                             93,849            77,418
            Syndication fees and selling
            expenses                              1,842,060         1,842,060
            Gain on sale of property                149,545           149,545
            Other non-deductible expenses           622,087           560,087
            Difference in book and tax
            depreciable cost basis                  915,085           915,085
            Difference in book and tax
            basis of investments                   (701,073)         (709,573)
            Other                                 (  69,286)        (  69,286)
                                                -----------        ----------

      Partner's (Deficit) Capital -
       tax return                               $   410,133        $  657,374
                                                ===========        ==========















                                      -18-
<PAGE>

PART II:    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
            ---------------------------------------
            FINANCIAL CONDITION AND RESULTS OF OPERATIONS
            ---------------------------------------------

Liquidity and Capital Resources
-------------------------------

Due to the sales of both  Williamsburg  South  Apartments and Pleasant Run Farms
Apartments  in December of 1996,  the  Partnership  now has  sufficient  cash to
enable it to not only fund  current  operations,  but also to provide for future
capital  improvements.  The Partnership had significant  negative cash flow from
operations during the first quarter of 1997,  primarily due to the setting up of
escrow accounts (replacement, etc.) with lenders. Also as a result of the sales,
the advances made by the General  Partner were  returned;  this will result in a
substantial decrease in interest expense for the future.

The  partnership  continues to view the  refinancing  of current  mortgages as a
viable means of increasing cash flow by obtaining lower interest rates.

There were no distributions  for the three month periods ended March 31,1997 and
1996. The  Partnership  does expect to resume  distributions  once it is able to
generate sufficient excess cash flow to complete all capital  improvements which
are scheduled and adequate reserves are set up for future such work.

Results of Operations:
----------------------

The  partnership  experienced  a net loss of  $309,172  or  $19.28  per  limited
partnership  unit  for the  period  ended  March  31,1997  versus  a net loss of
$271,347 or $16.93 per unit for quarter ended March 31, 1996.

Partnership  revenue for the quarter ended March 31, 1997 totaled $787,062 which
is down $343,500 from 1996 revenue of $1,130,552. The decrease in rental revenue
can be attributed to the sale of two properties in December  1996:  Williamsburg
South  Apartments and Pleasant Run Farms  Apartments.  Perrymont Office Building
continued to suffer from poor  occupancy,  which also resulted in lower revenues
for the Partnership. Ambassador Towers (formerly Cedar Ridge) is rebounding from
previously  low  occupancies,  and by mid-1997 is expected to almost  completely
leased.  Initially,  however,  rental concessions need to be offered to increase
the occupancies up to levels where  management  feels they should be, so revenue
will most likely not increase immediately to.






                                      -19-
<PAGE>

Results of Operations  (continued):
---------------------  ------------

For  the  quarter  ended  March  31,  1997,  Partnership  expenses  amounted  to
$1,057,1831, decreasing approximately $341,000 from the 1996 quarter end amount.
Obviously a large  portion of the decrease in expenses is due to the sale of the
two properties previously mentioned.  Additionally though,  management continues
to put forth great  efforts in looking for ways to  decrease  payroll,  repairs,
maintenance,  contracted  services  and  property  improvements  throughout  the
partnership.  As an example,  on-site maintenance staff is doing more repair and
replacement  work as opposed to contracting  the work to an outside  source.  As
property  performance  improves,  expenses  will  continue  to level off.  Total
interest expense is expected to decrease on Ambassador Towers as the property is
scheduled  to be  refinanced  at a lower  interest  rate in the coming  quarter.
Capital  improvements are being scheduled for the completion prior to the "peak"
rental season.

Tighter  collection  policies  continue to be put into place and reinforced with
all  on-site  and  management  staff.  This  should  allow for a rather  gradual
increase in revenue in the coming quarters.

Inducon  Joint  Venture - Amherst  generated a net loss of $41,106 for the three
month period ended March 31, 1997.  Net loss for the joint venture for the three
month  period  ended  March 31,  1996  amounted  to $3,711.  This  property  was
refinanced during the first quarter of 1997.

On a tax basis,  the  partnership  had a loss of  $247,241 or $15.42 per limited
partner unit for the three months  period ended March 31, 1997 versus a tax loss
of $213,716 or $13.33 per unit for the quarter ended March 31, 1996.
















                                      -20-
<PAGE>

               REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP III
               ---------------------------------------------------


                                     PART II
                                     -------

                                OTHER INFORMATION
                                -----------------


Item 1 - Legal Proceedings
--------------------------

The Partnership is not a party to, nor are any of the  Partnership's  properties
subject to any material pending legal proceedings  other than ordinary,  routine
litigation incidental to the Partnership's business.

Items 2, 3, 4 and 5
-------------------

Not applicable.

Item 6 - Exhibits and reports on Form 8-K
-----------------------------------------

a)    Exhibits - None.

b)    Reports on Form 8-K - None.




















                                      -21-
<PAGE>

                                   SIGNATURES


Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned, thereunto duly authorized.


REALMARK PROPERTY INVESTORS
LIMITED PARTNERSHIP III


By:   /s/Joseph M. Jayson                       July 14, 1997 
      ------------------------------            ------------------------
      Joseph M. Jayson,                         Date
      Individual General Partner



Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following  persons on behalf of the registrant and in the
capacities and on the dates indicated.


By:   REALMARK PROPERTIES, INC.
      Corporate General Partner

      /s/Joseph M. Jayson                       July 14, 1997  
      ------------------------------            ------------------------
      Joseph M. Jayson,                         Date
      President and Director



      /s/Michael J. Colmerauer                  July 14, 1997  
      ------------------------------            ------------------------
      Michael J. Colmerauer                     Date
      Secretary