FORM 10-K

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
(Mark One)

     (X)  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
          THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
               For the Fiscal Year Ended December 31, 1996

     ( )  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
          OF THE SECURITIES  AND EXCHANGE ACT OF 1934.  (NO FEE REQUIRED)

                         Commission File Number 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) 636-9090
Securities registered pursuant to Section 12(b) of the Act:    None
Securities registered pursuant to Section 12(g) of the Act:    Units of Limited
                                                            Partnership Interest

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-K or any
amendment to this Form 10-K.(X)

                       DOCUMENTS INCORPORATED BY REFERENCE
        See page 13 for a list of all documents incorporated by reference


<PAGE>


                                     PART I

ITEM 1:  BUSINESS
-------  --------

     The Registrant,  Realmark Property Investors Limited  Partnership-III  (the
"Partnership"), is a Delaware Limited Partnership organized in 1983, pursuant to
an  Agreement  and  Certificate  of  Limited   Partnership   (the   "Partnership
Agreement"),  under the Revised  Delaware  Uniform Limited  Partnership Act. The
Partnership's  general  partners are Realmark  Properties,  Inc. (the "Corporate
General Partner"), a Delaware corporation, and Joseph M. Jayson (the "Individual
General Partner").

     The  Registrant  commenced the public  offering of its Limited  Partnership
Units,  registered  with  the  Securities  and  Exchange  Commission  under  the
Securities  Act of 1933 as  amended  on  February  1, 1984,  and  concluded  the
offering  on January  31,  1985,  having  raised a total of  $15,551,000  before
deducting sales commissions and expenses of the offering.

     The Partnership's  primary business and its only industry segment is to own
and  operate  income-producing  real  property  for the  benefit of its  limited
partners. The Partnership's investment objectives are to (1) provide a return of
capital plus capital gains from the sale of appreciated properties;  (2) provide
partners with cash  distributions  until  properties  are sold; (3) preserve and
protect  partners  capital  and;  (4) achieve a build-up  of equity  through the
reduction of mortgage loans.

     In December 1996, the Partnership sold the Williamsburg South Apartments, a
200 unit apartment  complex  located in Atlanta,  Georgia,  and the Pleasant Run
Farms Apartments and Townhouses, a 130 unit complex located in Cincinnati, Ohio.
The Williamsburg  South Apartments were purchased in June 1985, and the Pleasant
Run Farms  Apartments  were  purchased by the  Partnership in November 1985. The
sale of these properties  generated a gain for financial  statement  purposes of
$3,501,323 for the period ended December 31, 1996.

     As of December 31, 1996, the Partnership owned two (2) apartment  complexes
with a total of 470 units and an office building containing approximately 40,000
square feet of net  rentable  space,  and was a 50% owner in a joint  venture of
four (4) single-story  office/warehouse  buildings with 84,960 total square feet
of rentable  space.  Each of the  complexes  is managed for the  Partnership  by
Realmark Corporation, an affiliate of the General Partners.

      Occupancy  for each complex as of December 31, 1996,  1995 and 1994 was as
follows:

                                                        1996      1995      1994
                                                        ----      ----      ----

Castle Dore                                             96 %      96 %      96 %
Williamsburg South                                      --        97 %      96 %
Pleasant Run                                            --        90 %      90 %
Ambassador Towers (formerly Cedar Ridge)                90 %      85 %      87 %
Perrymont                                               63 %      65 %      83 %



                                       2
<PAGE>

                                     PART I

ITEM 1:  BUSINESS (Con't.)

     For financial statement purposes,  the operations of the Partnership's four
apartment  complexes and one commercial  office building are  consolidated.  The
operations of the joint venture  office  building are recorded  separately.  The
following chart lists the percentage of total  Partnership  revenue generated by
each complex for the year indicated:

                                                      1996      1995      1994
                                                      ----      ----      ----

Castle Dore                                             24 %      24 %      24 %
Williamsburg South                                      24 %      21 %      21 %
Pleasant Run                                            15 %      16 %      15 %
Ambassador Towers (formerly Cedar Ridge)                32 %      33 %      33 %
Perrymont                                               5 %       6 %       7 %


     The business of the  Partnership is not seasonal.  As of December 31, 1996,
the Partnership did not directly employ any persons in a full-time position. All
persons who regularly  rendered  services on behalf of the  Partnership  through
December  31,  1996 were  employees  of the  Corporate  General  Partner  or its
affiliates.


ITEM 2:   PROPERTIES
-------   ----------

Following is a listing of properties and joint ventures owned by the Partnership
at December 31, 1996:

     Name
and Location         General Character of Property                Purchase Date
------------         -----------------------------                -------------

Castle Dore Apts.    Apartment complex; 18 buildings on           February 1985
Indianapolis, IN     16 acres; 190 units.  The outstanding
                     mortgage  balance at  December  31, 1996 was
                     $1,536,666,   maturing   February  2010  and
                     payable   monthly  at   $18,002,   including
                     interest  at  7.5%.  This  mortgage  balance
                     reflects   an   unamortized    discount   of
                     $579,685,  which  is  based  on  an  imputed
                     interest rate of 12.5%.










                                       3
<PAGE>


ITEM 2: PROPERTIES (Con't.)
---------------------------

     Name
and Location             General Character of Property            Purchase Date
------------             -----------------------------            -------------

Ambassador Towers        Apartment complex; 6 buildings on         December 1985
(formerly Cedar          11.6 acres; 280 units.  The outstanding
Ridge Apts.)             mortgages at December 31, 1996 are as follows:
Monroeville, PA          a $467,891 mortgage, maturing April 1998
                         with monthly  payments of $8,980,  including
                         interest at 7.75%.  The  carrying  amount of
                         this   mortgage   reflects  an   unamortized
                         discount  of  $42,300,  which is based in an
                         imputed  interest  rate of 11%. A $1,177,329
                         mortgage,  maturing  May 2004  with  monthly
                         payments  of $20,455  including  interest at
                         8.75%.  The carrying amount of this mortgage
                         reflects an unamortized discount of $84,414,
                         which is based on an imputed  interest  rate
                         of 11%. A $989,413  mortgage,  that  matured
                         November 1, 1996,  with monthly  payments of
                         $9,621,  including interest at 10.75%. These
                         mortgages  were  refinanced in February 1997
                         with   a   variable    rate   mortgage   for
                         $3,263,000.  The new  mortgage  provides for
                         payments of  interest  only  through  August
                         1998 and monthly  installments  of principal
                         and interest  thereafter through maturity at
                         February 1, 2004.

Perrymont Office Bldg.   Office building; one building on           August 1985
McCandless, PA           2.3 acres; 40,000 square feet.  The
                         outstanding mortgage balance at December 31,
                         1996 was $1,259,701.  The mortgage  provides
                         for  interest  rates  and  monthly  payments
                         through  December  1998 as  follows:  during
                         1996 monthly  payments of $9,660,  including
                         interest  of 7.875%;  during  1997 and 1998,
                         monthly   payments  of  $10,187,   including
                         interest  at  8.5%.  The  mortgage   matures
                         January 1999.






                                       4
<PAGE>


ITEM 2: PROPERTIES (Con't.)
---------------------------

     Name
and Location              General Character of Property           Purchase Date
------------              -----------------------------           -------------

Inducon Joint Venture -   Four office/warehouse buildings on           June 1985
  Amherst                 4 acres with 84,960 square feet of rentable
Amherst, NY               space; the Partnership is a 50% owner; the
                          complex is managed by the other Joint
                          Venture Partner.  The outstanding mortgage
                          balance at December 31, 1996 was $260,450
                          maturing November 1996;  the mortgage
                          matured and is currently payable on demand
                          including interest at 10.5%.  The Venture
                          also has a demand note outstanding of
                          $1,849,245 at December 31, 1996.
                          Interest on the note is between 7.125 -
                          7.25%.  Both instruments were refinanced
                          in March 1997 with an 8.62% fixed rate
                          mortgage for $1,875,000;  the new mortgage
                          will mature March 1, 2004.

ITEM 3:   LEGAL PROCEEDINGS
-------   -----------------

     The  Partnership  is not a  party  to,  nor  are  any of the  Partnership's
properties the subject of, any material pending legal proceedings.


ITEM 4:   SUBMISSION OF MATTERS TO A VOTE OF SECURITY
-------   -------------------------------------------
          HOLDERS.
          --------

          None.
                                     PART II

ITEM 5:   MARKET FOR REGISTRANT'S UNITS OF LIMITED
-------   ----------------------------------------
          PARTNERSHIP INTEREST.
          ---------------------

     There is currently no  established  trading market for the units of Limited
Partnership  Interest of the Partnership and it is not anticipated that any will
develop in the future.

     There were no distributions  during the years ended December 31, 1996, 1995
and 1994. The Partnership does not anticipate resuming distributions until it is
able to generate sufficient excess cash flow.

     As of  December  31,  1996,  there  were 1,954  record  holders of units of
Limited Partnership Interest.


                                       5
<PAGE>

ITEM 6:  SELECTED FINANCIAL DATA

<TABLE>
<CAPTION>
                                       Realmark Properties Investors Limited Partnership-III

                               Year Ended     Year Ended      Year Ended      Year Ended      Year Ended
                             Dec. 31, 1996   Dec. 31, 1995   Dec. 31, 1994   Dec. 31, 1993   Dec. 31, 1992
                             -------------   -------------   -------------   -------------   -------------
<S>                           <C>             <C>             <C>             <C>             <C>
Total assets                  $  8,869,221    $ 12,403,691    $ 13,195,397    $ 13,757,093    $ 16,852,848
                              ============    ============    ============    ============    ============

Notes payable and
  long-term obligations       $  5,431,000    $ 10,276,248    $ 10,492,540    $ 10,408,867    $ 12,632,576
                              ============    ============    ============    ============    ============
__________________________________________________________________________________________________________


Revenue                       $  4,429,043    $  4,632,199    $  4,505,896    $  4,642,864    $  4,563,296

Expenses                         5,357,211       5,931,484       5,549,133       5,586,582       5,172,546

Loss from
  joint venture                   (142,165)        (93,698)       (164,510)        (69,136)        (73,614)
                              ------------    ------------    ------------    ------------    ------------

Loss from
  operations                    (1,070,333)     (1,392,983)     (1,207,747)     (1,012,854)       (682,864)

Gain on sale of property         3,501,323            --              --              --              --
                              ------------    ------------    ------------    ------------    ------------

Net income (loss)             $  2,430,990    ($ 1,392,983)   ($ 1,207,747)   ($ 1,012,854)   ($   682,864)
                              ============    ============    ============    ============    ============
__________________________________________________________________________________________________________


Net cash (used in)
  provided by operating
  activities                  ($   275,818)   ($   229,343)   ($   406,562)   ($   169,323)   $    285,923

Principal payments on
  long-term debt net of
  proceeds from mortgage
  refinancing/mortgage
  receivable                    (4,905,905)       (216,292)         19,684          82,564        (252,089)
                              ------------    ------------    ------------    ------------    ------------

Net cash (used in) provided
  by operating activities
  less principal payments     ($ 5,181,723)   ($   445,635)   ($   386,878)   ($    86,759)   $     33,834
                              ============    ============    ============    ============    ============
__________________________________________________________________________________________________________


Income (loss) per limited
  partnership unit                  141.68          (86.89)         (75.33)         (63.18)         (42.59)
                              ============    ============    ============    ============    ============

Distributions per limited
  partnership unit            $       --      $       --      $       --              4.33            4.38
                              ============    ============    ============    ============    ============

Weighted average number
  of Limited Partnership
  units outstanding                 15,551          15,551          15,551          15,551          15,551
                              ============    ============    ============    ============    ============
</TABLE>

                                       6
<PAGE>


ITEM 7:    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
-------    ---------------------------------------
           FINANCIAL CONDITION AND RESULTS OF OPERATIONS
           ---------------------------------------------

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

     Through much of 1996, the Corporate  General  Partner  continued to advance
funds to the Partnership to fund cash flow shortages needed for operations. Such
advances were and continue to be payable on demand and accrue interest at a rate
of 11%. At December  31, 1996,  the advances  outstanding  totaled  $208,156,  a
decrease of over $1 million from the prior year.

     Decreases  in  occupancy  at  Ambassador  Towers  (formerly  Cedar  Ridge),
Pleasant  Run and  Perrymont  caused the  Partnership  to  struggle  financially
through the year. In the last quarter of the year,  Ambassador  Towers occupancy
increased by a considerable amount;  Perrymont,  unfortunately,  has not reached
this point yet;  its  occupancy  at the end of 1996 was only 63%. At that level,
and without a  significant  reduction  in  expenses,  the  property  could be in
default concerning its mortgage. Occupancy at Castle Dore and Williamsburg South
remained fairly high through much of 1996 (i.e. in the 90 to 95% range).

     The General Partners were successful in selling two properties during 1996:
Williamsburg South and Pleasant Run. The properties came under contract for sale
during July 1996.  Upon the  completion  of all due diligence on the part of the
purchaser,  the sales closed in December of 1996 at sales  prices of  $4,831,000
and  $3,350,000,  respectively.  The completed sales brought the Partnership the
influx of cash which it needed for so long to make improvements to the remaining
properties,  as well as to pay back the advances  from the General  Partners and
their  affiliates  which had been building  through the past several years.  The
General  Partners  believe  the sales were in the best  interest  of the Limited
Partners.  There  are also  signed  contracts  for the sale of  Castle  Dore and
Ambassador Towers (formerly Cedar Ridge Apartments) which were signed in July of
1996. The sales are subject to a number of  contingencies  and are cancelable by
the purchaser.  Until such time as all of the buyers due diligence is performed,
no closing date can be estimated.

     Management has once again  implemented  corrective action plans in response
to the  going  concern  consideration  discussed  in  Note  11 to the  financial
statements,  as well as to deal with the United States Department of Housing and
Urban  Development  (HUD)  noncompliance  detailed in the notes to the financial
statements.  These plans  include  tighter  cash  management  through the closer
monitoring of expenses such as payroll, advertising and maintenance,  which have
typically been the expenses that have increased from year to year. Additionally,
tighter  credit  policies  have been put into place as a means of  avoiding  the
collection   problems  which  were  incurred  during  the  past  year.  The  HUD
noncompliance  detailed in the notes technically puts the Partnership in default
of the mortgage which could result in fines or interest charges being levied, or
the take over of the  property  by HUD. A  concerted  effort at  correcting  the
noncompliance should lead to the ultimate cure of such default.

Subsequent  to December  31,  1996,  the General  Partners  were  successful  in
refinancing two properties' mortgages:  Ambassador Towers and Inducon - Amherst.
The  refinancings  extended the mortgages,  two of which matured during 1996 and
were temporarily  extended by the lenders,  and also gave the Partnership  lower
interest rates which will ultimately improve cash flow in the Partnership.

The Partnership made no distributions in the years ended December 31, 1996, 1995
and 1994.  Management  hopes to make a  distribution  in the coming year, but at
this  date,  all  available  cash is  going  to be  utilized  to fund  necessary
improvements to the properties.

                                       7
<PAGE>


ITEM 7:   MANAGEMENT'S DISCUSSION AND ANALYSIS OF
-------   ---------------------------------------
          FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Con't.)
          ------------------------------------------------------

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

     For the year ended December 31, 1996, the Partnership  earned net income of
$2,430,990 or $141.68 per limited  partnership  unit.  The income is a result of
the  previously  detailed  sales of  Williamsburg  South and  Pleasant  Run. The
Partnership  had a net  loss  before  the  gain  recognized  upon  the  sale  of
$1,070,333.  This  compares to the years ended  December  31, 1995 and 1994 when
losses incurred  totaled  $1,392,983 or $86.89 per limited  partnership unit and
$1,207,747 or $75.33 per limited partnership unit, respectively.

     Partnership   revenues  for  the  year  ended  December  31,  1996  totaled
$4,429,043,  consisting of rental income of $4,004,140  and other income,  which
includes interest,  laundry income, and other miscellaneous sources of income of
$424,903. The decrease in rental revenue from that of the two previous years may
be  attributed  to the low  occupancy  levels  throughout  much  of the  year at
Ambassador  Towers  and  Pleasant  Run,  and the  recurrent  struggle  with  low
occupancy  at  Perrymont.  Rental  revenues in the year ended  December 31, 1995
amounted  to  $4,336,896  and  in the  year  ended  December  31,  1994  totaled
$4,280,064.  There was a  considerable  increase in other income during the year
ended  December  31,  1996,  in part due to  increased  laundry  revenue  at the
residential  properties and real estate tax refunds  received for tax appeals at
Ambassador Towers.  Increasing occupancy,  as well as decreasing  delinquencies,
remains the major focus of management.  Tighter credit policies and extended and
attractive  incentive programs continue to be management's means of reaching the
income levels needed to improve the cash flow in the Partnership.

     Partnership   expenses  for  the  year  ended  December  31,  1996  totaled
$5,357,211,  a  significant  decrease  from the  expenses  for the  years  ended
December 31, 1995 and 1994 which were $5,931,484 and  $5,549,133,  respectively.
The most  prominent  decrease  can be seen in property  operations.  There was a
decrease  of  approximately  $381,306  or almost  13%  between  the years  ended
December 31, 1996 and 1995.  Management  has exercised  strict cost  controlling
factors which have resulted in more control over expenses related to payroll and
associated costs, repairs and maintenance and contracted services. This was done
in response to the cash flow  difficulties  which the  Partnership  has suffered
through for the past several years.  Interest paid to affiliates  increased from
previous years due to the higher carrying value of the advances from the General
Partner(s)  and  their  affiliates  during  most  of  the  year.  Administrative
expenses,  other than those paid to affiliates,  totaled $438,560 for 1996 which
is fairly  constant as compared  to the year ended  December  31, 1995 when they
totaled  $436,109  and the year  ended  December  31,  1994  when  they  totaled
$442,213.  The decrease in  administrative  expenses  paid to  affiliates is the
result of decreased  accounting  and  portfolio  management  fees and  decreased
management  fees due to the  vacancy and  collection  problems at several of the
properties in the Partnership.

     Management  has  plans to use the  cash  received  from  the  sales to make
necessary   improvements  to  the  remaining   properties  in  the  Partnership.
Improvements such as interior and exterior painting, new carpets and appliances,
and roof and paving  repairs are all scheduled  for the coming year.  Management
feels these  improvements are needed to attract new tenants as well as to retain
existing  tenants.  Although this work is necessary in order to increase  rental
revenue(s)  generated in the  Partnership,  all work is being done with the cash
flow of the Partnership  always in mind;  expenditures will be closely monitored
so as not to reverse the trend (i.e.  decreasing  expenses)  that was set during
1996. One means of controlling  such expenses has been  management's  success at
obtaining  large price  discounts on paint,  carpeting  and  appliances  through
negotiations with large national companies, such as Whirlpool.

                                       8
<PAGE>

ITEM 7:   MANAGEMENT'S DISCUSSION AND ANALYSIS OF
-------   ---------------------------------------
          FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Con't.)
          ------------------------------------------------------

Results of Operations (Con't.):
-------------------------------

     The  Partnership  agreement  provides for the taxable income or losses from
operations  to be  allocated  97% to the Limited  Partners and 3% to the General
Partners.  Income and losses from the sale(s) of  properties  is to be allocated
first to the Limited  Partners to the extent they receive their average adjusted
capital  balances plus a  preferential  return of 7% and an additional 5%; after
this,  the income is to be allocated 87% to the Limited  Partners and 13% to the
General Partners.

     Inducon  Joint  Venture - Amherst  generated a net loss of $149,647 for the
year ended December 31, 1996 as compared to the loss which resulted in the years
ended  December  31, 1995 and 1994 of $98,629  and  $173,168,  respectively.  In
accordance  with the joint  venture  agreement,  95% of the income or losses are
passed  through to the  Partnership  and the  remaining 5% is allocated to other
joint venture partner.

     For the year ended  December 31, 1996,  the tax basis income was $2,940,564
or $183.42 per limited  partnership unit compared to a tax loss of $1,154,994 or
$72.04  per  unit  for the  year  ended  December  31,  1995  and a tax  loss of
$1,216,345 or $75.87 per limited  partnership  unit for the year ended  December
31, 1994. The gain from the sale of Williamsburg  South and Pleasant Run for tax
purposes amounted to $4,467,961.


ITEM 8:   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
-------   --------------------------------------------

     Listed under Item 14 of the report.


ITEM 9:   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
-------   ---------------------------------------------
          ON ACCOUNTING AND FINANCIAL DISCLOSURE.
          ---------------------------------------

     None.
















                                       9
<PAGE>


                                    PART III
                                    --------

ITEM 10:  DIRECTORS AND EXECUTIVE OFFICERS OF THE
--------  ---------------------------------------
          REGISTRANT.
          -----------

     The Partnership, as an entity, does not have any directors or officers. The
Individual General Partner of the Partnership is Joseph M. Jayson. The directors
and executive officers of Realmark Properties, Inc., the Partnership's Corporate
General Partner, as of March 1, 1996, are listed below. Each director is subject
to election on an annual basis.


                            Title of All Positions                Year First
Name                        Held With the Company             Elected Director
----                        ---------------------             ----------------

Joseph M. Jayson             President and Director                 1979

Judith P. Jayson             Vice President and Director            1979

Michael J. Colmerauer        Secretary


     Joseph M. Jayson,  President and Director of Realmark Properties,  Inc. and
Judith P. Jayson, Vice President and Director of Realmark Properties,  Inc., are
married to each other.

     The Director and Executive  Officers of the Corporate  General  Partner and
their principal  occupations and affiliations during the last five years or more
are as follows:

     Joseph M. Jayson,  age 58, is Chairman and Director and sole stockholder of
J.M.  Jayson  &  Company,   Inc.  and  certain  of  its  affiliated   companies:
Westmoreland   Capital   Corporation,   Oilmark   Corporation  and  U.S.  Energy
Development  Corporation.  In addition,  Mr. Jayson is President and Director of
Realmark Corporation and Realmark Properties, Inc., wholly owned subsidiaries of
J.M.  Jayson & Company,  Inc.  and  co-General  Partner of  Realmark  Properties
Investors   Limited   Partnership,   Realmark   Properties   Investors   Limited
Partnership-II, Realmark Properties Investors Limited Partnership-III,  Realmark
Properties  Investors  Limited  Partnership-IV,  Realmark  Properties  Investors
Limited  Partnership-V,  Realmark Properties Investors Limited  Partnership-VI A
and Realmark  Properties  Investors  Limited  Partnership-VI  B. Mr. Jayson is a
member of the Investment  Advisory Board of the Corporate  General Partner.  Mr.
Jayson has been  engaged in real estate  business for the last 34 years and is a
Certified  Property  Manager  as  designated  by the  Institute  of Real  Estate
Management ("I.R.E.M.").  Mr. Jayson received a B.S. Degree in Education in 1961
from Indiana  University,  a Masters  Degree from the  University  of Buffalo in
1963, and has served on the Educational  Faculty of the Institute of Real Estate
Management. Mr. Jayson has for the last 34 years been engaged in various aspects
of real estate brokerage and investment. He brokered residential properties from
1962 to 1964,  commercial  and investment  properties  from 1964 to 1967, and in
1967 left  commercial  real estate to form his own investment  firm.  Since that
time, Mr. Jayson and J.M. Jayson & Company, Inc. have formed, or participated in
various ways in forming, over 30 real estate related limited  partnerships.  For
the past  sixteen  years,  Mr.  Jayson and J.M.  Jayson & Company,  Inc.  and an
affiliate have also engaged in developmental drilling for gas and oil.

                                       10

<PAGE>


     Judith P.  Jayson,  age 57, is  currently  Vice-President  and  Director of
Realmark  Properties,  Inc.  She is also a Director of the  property  management
affiliate,  Realmark  Corporation.  Mrs.  Jayson has been  involved  in property
management for the last 35 years and has extensive  experience in the hiring and
training of property  management  personnel  and in  directing,  developing  and
implementing  property  management systems and programs.  Mrs. Jayson,  prior to
joining the firm in 1973,  taught business in the Buffalo,  New York high school
system. Mrs. Jayson graduated from St. Mary of the Woods College in Terre Haute,
Indiana,  with a degree in Business  Administration.  Mrs. Jayson is the wife of
Joseph M. Jayson, the Individual General Partner.

     Michael J. Colmerauer, 39, is Secretary and in-house legal counsel for J.M.
Jayson & Company,  Inc., Realmark  Corporation,  Realmark  Properties,  Inc. and
other companies  affiliated with the General Partners.  He received a Bachelor's
Degree (BA) from Canisius  College in 1980 and a Juris  Doctors  (J.D.) from the
University of Tulsa in 1983. Mr. Colmerauer is a member of the American and Erie
County Bar  Association  and has been  employed by the Jayson group of companies
for the last 13 years.


ITEM 11:  EXECUTIVE COMPENSATION.
--------  -----------------------

     No direct  remuneration was paid or payable by the Partnership to directors
and officers  (since it has no directors or officers) for its fiscal years ended
December 31, 1996, 1995 and 1994 nor was any direct remuneration paid or payable
by the  Partnership to directors or officers of Realmark  Properties,  Inc., the
Corporate  General  Partner and sponsor for the years ended  December  31, 1996,
1995 and 1994.

     The following  table sets forth for the years ended December 31, 1996, 1995
and 1994 the compensation  paid by the Partnership,  directly or indirectly,  to
affiliates of the General Partners:

<TABLE>
<CAPTION>

  Entity Receiving                     Type of
      Compensation                  Compensation              1996          1995          1994
      ------------                  ------------              ----          ----          ----

<S>                        <C>                             <C>           <C>            <C>
Realmark Properties, Inc.
  (The Corporate
  General Partner)          Interest charged on
                              accounts payable -
                              affiliates                     $149,954      $101,378       $45,590
                                                           -----------   -----------    ----------

                            Reimbursements for
                            allocated expenses of the
                            General Partners:
                              Investor Services Fees           18,746         8,731         9,373
                              Brokerage                        11,936        13,353        14,704
                              Portfolio Management
                                & Accounting Fees             147,690       247,152        91,156
                              Partnership Management Fee       -             -              2,925

Realmark Corporation        Property Management Fees          217,095       227,134       223,083
                            Computer Service Fees              14,040        14,040        14,040
                                                           -----------   -----------    ----------
                                                              409,507       510,410       355,281
                                                           -----------   -----------    ----------

                            Total                            $559,461      $611,788      $400,871
                                                           ===========   ===========    ==========
</TABLE>

                                       11
<PAGE>


     The  Corporate  General  Partner is  entitled to a  continuing  Partnership
Management  Fee  equal to 7% of net cash  flow (as  defined  in the  Partnership
Agreement),  of which 2% is subordinated to the receipt by the Limited  Partners
of a  noncumulative  annual  cash  return  equal to 7% of the  average  of their
adjusted capital  contributions (as defined in the Partnership  Agreement).  The
Corporate General Partner is paid its 5% Partnership  Management Fee annually as
cash flow allows. The 2% subordinated fee will not be paid or accrued until such
time as the Limited  Partners have  received  their 7% return and payment of the
fee  becomes  probable.  The  General  Partners  are  also  entitled  to  3%  of
Distributable  Cash (as  defined in the  Partnership  Agreement)  and to certain
expense reimbursements with respect to Partnership operations.

     The General Partners are allowed to collect property  disposition fees upon
the 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 sale 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 a cumulative amount
equal to their capital  contributions.  The fees earned on the sale of Bryn Mawr
Apartments in 1986 and Parc Bordeau Apartments in 1988 and the two properties in
the  current  year will not be  recorded  as a  liability  in the  Partnership's
financial statements until such time as payment is probable.


ITEM 12:  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
--------  -----------------------------------------------
          AND MANAGEMENT.
          ---------------

     No person is known to the Partnership to own of record or beneficially more
than five  percent  (5%) of the Units of  Limited  Partnership  Interest  of the
Partnership. Excluding the General Partners' interest in the Partnership ($1,000
initial  capital  contribution),  the General  Partners as of December  31, 1996
owned no Units of Limited Partnership Interest.


ITEM 13:  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS:
--------  -----------------------------------------------

     (a)  Transactions with Management and Others.
          ----------------------------------------

     No  transactions  have occurred  between the  Partnership  and those in the
management of Realmark Properties, Inc. All transactions between the Partnership
and Realmark  Properties,  Inc. (the  Corporate  General  Partner) and any other
affiliated  organization  are described in Item 11 of this report and in Notes 6
and 7 to the financial statements.












                                       11
<PAGE>


ITEM 14:  EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND
          REPORTS ON FORM 8-K.

     (a)  Financial Statements and Schedules.
          -----------------------------------

          FINANCIAL STATEMENTS                                          PAGE
          --------------------                                          ----

          (i)  Independent Auditors' Report                              15
          (ii) Balance Sheets at December 31, 1996 and 1995              16
          (iii)     Statements of Operations for the years ended
                 December 31, 1996, 1995 and 1994                        17
          (iv) Statements of Partners' Capital (Deficit) for the
                 years ended December 31, 1996, 1995 and 1994            18
          (v)  Statements of Cash Flows for the years ended
                 December 31, 1996, 1995 and 1994                        19
          (vi) Notes to Financial Statements                           20 - 34

          FINANCIAL STATEMENT SCHEDULES
          -----------------------------

          (i)  Schedule II - Valuation and Qualifying Accounts           35
          (ii) Schedule III - Real Estate and Accumulated Depreciation 36 - 37

     All other  schedules  are omitted  because they are not  applicable  or the
required information is shown in the financial statements or the notes thereto.

     (b)  Reports on Form 8-K.
          --------------------

          None

     (c)  Exhibits
          --------

     4.   Instruments defining the rights of security holder, including
          indentures

          (a)     Certificate of Limited  Partners  filed with the  Registration
                  Statement  of the  Registrant  Form S-11,  filed  November 21,
                  1983,  and  subsequently   amended   incorporated   herein  by
                  reference.


                                       13
<PAGE>


ITEM 14:  EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND
--------  ---------------------------------------------
          REPORTS ON FORM 8-K (Con't.).
          -----------------------------


10.  Material contracts

            (a)   Property  Management   Agreement  with  Realmark   Corporation
                  included with the Registration  Statement of the Registrant as
                  filed and amended to date incorporated herein by reference.

            (b)   Partnership Agreement included with the Registration Statement
                  of the  Registrant  as filed and amended to date  incorporated
                  herein by reference.

            (c)   Partnership  sales  agreements  with  unrelated  third-parties
                  included with the third quarter Form 10Q  incorporated  herein
                  by reference.





















                                       14
<PAGE>








INDEPENDENT AUDITORS' REPORT


The Partners
Realmark Property Investors Limited Partnership - III:

We have audited the accompanying  balance sheets of Realmark Property  Investors
Limited  Partnership-III  as of  December  31,  1996 and 1995,  and the  related
statements of operations,  partners' capital (deficit),  and cash flows for each
of the three  years in the period  ended  December  31,  1996.  Our audits  also
included the financial statement schedules listed in the Index at Item 14. These
financial statements and financial statement schedules are the responsibility of
the  General  Partners.  Our  responsibility  is to  express  an  opinion on the
financial statements and the financial statement schedules based on our audits.

We conducted our audits in accordance with generally accepted auditing standards
and Government  Auditing  Standards.  Those  standards  require that we plan and
perform the audits to obtain  reasonable  assurance  about whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates made by the General  Partners,  as well as evaluating the
overall financial statement  presentation.  We believe that our audits provide a
reasonable basis for our opinion.

In our  opinion,  such  financial  statements  present  fairly,  in all material
respects,   the  financial  position  of  Realmark  Property  Investors  Limited
Partnership-III  at December 31, 1996 and 1995 and the results of its operations
and its cash flows for each of the three years in the period ended  December 31,
1996 in conformity with generally accepted accounting  principles.  Also, in our
opinion, such financial statement schedules,  when considered in relation to the
basic  financial  statements  taken as a whole,  present  fairly in all material
respects the information set forth therein.

The accompanying  financial  statements and financial  statement  schedules have
been prepared assuming that the Partnership will continue as a going concern. As
discussed in Note 11 the Partnership's failure to meet its Department of Housing
and Urban Development  regulatory agreement  requirements,  its recurring losses
from  operations,  and its continuing  operating cash flow  difficulties,  raise
substantial doubt about its ability to continue as a going concern. Management's
plans  concerning  these  matters are also  described in Note 11. The  financial
statements do not include any adjustments  that might result from the outcome of
this uncertainty.



DELOITTE & TOUCHE, LLP
Buffalo, New York
March 25, 1997

                                       15
<PAGE>


               REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP-III
                                 BALANCE SHEETS
                           DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>

Assets                                                                  1996            1995
                                                                    ------------    ------------

<S>                                                                <C>              <C>
Property, at cost (including assets held for sale, see Note 3):
  Land                                                              $    935,000    $  1,410,000
  Buildings and improvements                                          10,032,459      17,238,605
  Furniture and fixtures                                               1,481,974       2,275,548
                                                                    ------------    ------------
                                                                      12,449,433      20,924,153
  Less accumulated depreciation                                        5,837,777       9,283,886
                                                                    ------------    ------------
      Property, net                                                    6,611,656      11,640,267

Investment in joint venture                                               25,156         167,321

Cash                                                                   1,811,962            --
Cash - security deposits                                                  56,086          53,989
Trade accounts receivable, net of allowance for doubtful accounts
  of $584,097 and $800,839 for 1996 and 1995, respectively                    69          21,238
Other assets                                                             364,292         520,876
                                                                    ------------    ------------

           Total Assets                                             $  8,869,221    $ 12,403,691
                                                                    ============    ============


Liabilities and Partners' (Deficit) Capital

Liabilities:
  Cash overdraft                                                    $       --      $     36,921
  Mortgages payable                                                    5,431,000      10,276,248
  Accounts payable and accrued expenses                                  713,233         777,976
  Accounts payable - affiliates                                          208,156       1,258,243
  Interest payable                                                       100,327          88,868
  Security deposits and prepaid rents                                    289,671         269,591
                                                                    ------------    ------------
           Total Liabilities                                           6,742,387      12,707,847
                                                                    ------------    ------------

Partners' (deficit) capital:
  General partners                                                      (199,668)       (427,399)
  Limited partners                                                     2,326,502         123,243
                                                                    ------------    ------------
           Total partners' capital (deficit)                           2,126,834        (304,156)
                                                                    ------------    ------------

           Total Liabilities and Partners' (Deficit) Capital        $  8,869,221    $ 12,403,691
                                                                    ============    ============
</TABLE>




                        See notes to financial statements

                                       16
<PAGE>


               REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP-III
                            STATEMENTS OF OPERATIONS
              FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

<TABLE>
<CAPTION>
                                                     1996           1995           1994
                                                 -----------    -----------    -----------

<S>                                              <C>            <C>            <C>
Income:
  Rental                                         $ 4,004,140    $ 4,336,896    $ 4,280,064
  Interest and other                                 424,903        295,303        225,832
                                                 -----------    -----------    -----------
  Total income                                     4,429,043      4,632,199      4,505,896
                                                 -----------    -----------    -----------

Expenses:
  Property operations                              2,584,892      2,966,198      2,814,851
  Interest:
    Paid to affiliates                               149,954        101,378         45,590
    Other                                          1,165,193      1,137,438      1,135,957
  Depreciation and amortization                      609,105        779,951        755,241
  Administrative:
    Paid to affiliates                               409,507        510,410        355,281
    Other                                            438,560        436,109        442,213
                                                 -----------    -----------    -----------
  Total expenses                                   5,357,211      5,931,484      5,549,133
                                                 -----------    -----------    -----------

Loss before allocated loss from joint venture
  and gain on sale of properties                    (928,168)    (1,299,285)    (1,043,237)

Allocated loss from joint venture                   (142,165)       (93,698)      (164,510)

Gain on sale of properties                         3,501,323           --             --
                                                 -----------    -----------    -----------

Net income (loss)                                $ 2,430,990    ($1,392,983)   ($1,207,747)
                                                 ===========    ===========    ===========

Income (loss) per limited partnership unit       $    141.68    ($    86.89)   ($    75.33)
                                                 ===========    ===========    ===========


Distributions per limited partnership unit       $      --      $      --      $      --
                                                 ===========    ===========    ===========

Weighted average number of limited partnership
  units outstanding                                   15,551         15,551         15,551
                                                 ===========    ===========    ===========
</TABLE>




                        See notes to financial statements





                                       17
<PAGE>

               REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP-III
                    STATEMENTS OF PARTNERS' CAPITAL (DEFICIT)
              FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994


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

Balance, January 1, 1994             ($  349,378)         15,551    $ 2,645,952

Net loss                                 (36,232)           --       (1,171,515)
                                     -----------     -----------    -----------

Balance, December 31, 1994              (385,610)         15,551      1,474,437

Net loss                                 (41,789)           --       (1,351,194)
                                     -----------     -----------    -----------

Balance, December 31, 1995              (427,399)         15,551        123,243

Net income                               227,731            --        2,203,259
                                     -----------     -----------    -----------

Balance, December 31, 1996           ($  199,668)         15,551    $ 2,326,502
                                     ===========     ===========    ===========






                         See notes to financial statements












                                       18
<PAGE>

                           REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP-III
                                         STATEMENTS OF CASH FLOWS
                           FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>


                                                            1996           1995           1994
                                                         -----------    -----------    -----------
<S>                                                      <C>            <C>            <C>
Cash Flows from operating activities:
  Net income (loss)                                      $ 2,430,990    ($1,392,983)   ($1,207,747)
  Adjustments to reconcile net loss to net cash used
    in operating activities:
    Depreciation and amortization                            609,105        779,951        755,241
    Amortization of mortgage discounts                        60,657         65,723         63,989
    Loss from joint venture                                  142,165         93,698        164,510
  Gain on sale of properties                              (3,501,323)          --             --
  Changes in operating assets and liabilities:
    Cash - security deposits                                  (2,097)        (1,664)        (1,524)
    Trade accounts receivable                                 21,169         13,518        (20,910)
    Other assets                                              (3,280)        69,355       (175,517)
    Accounts payable and accrued expenses                    (64,743)       184,183        (26,681)
    Interest payable                                          11,459           (482)        (2,490)
    Security deposits and prepaid rents                       20,080         25,081         44,567
                                                         -----------    -----------    -----------
Net cash used in operating activities                       (275,818)      (163,620)      (406,562)
                                                         -----------    -----------    -----------

Cash flows from investing activities:
  Property acquisitions and additions                         (7,307)      (171,686)      (198,553)
  Distributions from joint venture                              --             --           15,000
  Proceeds from dispositions of properties                 8,088,000           --             --
                                                         -----------    -----------    -----------
Net cash provided by (used in) investing activities        8,080,693       (171,686)      (183,553)
                                                         -----------    -----------    -----------

Cash flows from financing activities:
  (Decrease) increase in cash overdraft                      (36,921)        36,921           --
  (Decrease) increase in accounts payable - affiliates    (1,050,087)       571,866        546,982
  Proceeds from mortgage refinancing                            --             --        2,250,000
  Principal payments on mortgages                         (4,905,905)      (282,015)    (2,230,316)
                                                         -----------    -----------    -----------
Net cash (used in) provided by financing activities       (5,992,913)       326,772        566,666
                                                         -----------    -----------    -----------

Increase (decrease) in cash                                1,811,962         (8,534)       (23,449)

Cash - beginning of year                                        --            8,534         31,983
                                                         -----------    -----------    -----------

Cash - end of year                                       $ 1,811,962    $      --      $     8,534
                                                         ===========    ===========    ===========

</TABLE>




                                       See notes to financial statements

                                                      19
<PAGE>


               REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP-III
                          NOTES TO FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 and 1994



1.   FORMATION AND OPERATION OF PARTNERSHIP:
     ---------------------------------------

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

     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 of the public  offering  of
limited partnership units, which occurred on April 26, 1984. All items of income
and  expense  arose  subsequent  to  this  date.  The  maximum  offering  of the
Partnership was $20,000,000  (20,000 units).  The offer  terminated  January 31,
1985 with gross offering  proceeds of $15,551,000  (15,551  units).  The General
Partners are Realmark Properties, Inc., a wholly-owned subsidiary of J.M. Jayson
& Company, Inc. (JMJ) and Joseph M. Jayson, the Individual General Partner.
Joseph M. Jayson is the sole shareholder of JMJ.

     Under the partnership agreement,  the general partners and their affiliates
can receive  compensation for services  rendered and  reimbursement for expenses
incurred on behalf of the Partnership (see Note 7).

     The  partnership  agreement  also  provides  that  distribution  of  funds,
revenues,  costs and expenses arising from partnership activities,  exclusive of
any sale or  refinancing  activities,  are to be  allocated  97% to the  Limited
Partners  and 3% to the  General  Partners.  Net income or losses  and  proceeds
arising from a sale or  refinancing  shall be  distributed  first to the Limited
Partners in amounts  equivalent to a 7% return on their average adjusted capital
balances,  plus an amount equal to their  capital  contributions.  The Agreement
also provides for payment of property  disposition fees to Realmark  Properties,
Inc.,  prior  to  additional   distributions  to  limited  partners  in  amounts
equivalent to 5% of their average adjusted capital balances. Additional proceeds
shall then be  allocated to all  partners in amounts  equal to their  respective
positive capital account balances and the remainder, if any, in the ratio of 87%
to the Limited Partners and 13% to the General Partners.  Income and losses from
the sale(s) of  properties is to be allocated  first to the Limited  Partners to
the  extent  they  receive  their  average  adjusted  capital  balances  plus  a
preferential  return of 7% and an additional 5%; after this, the income is to be
allocated 87% to the Limited Partners and 13% to the General Partners.


2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
--   -------------------------------------------

     (a)  Use of  Estimates
          -----------------

     The  preparation  of financial  statements  in  conformity  with  generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions  that  affect the  reported  amounts of assets and  liabilities  and
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements  and the  reported  amounts  of  revenues  and  expenses  during  the
reporting period. Actual results could differ from those estimates.




                                       20
<PAGE>

               REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP-III
                          NOTES TO FINANCIAL STATEMENTS
                                   (Continued)


2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Con't.):
     ----------------------------------------------------

     (b)  Property and Depreciation
          -------------------------

     Depreciation is provided using the straight-line  method over the estimated
useful  lives  of the  respective  assets.  The  estimated  useful  lives of the
Partnership's  assets  range from 5 to 25 years.  Depreciation  expense  totaled
$449,241,  $732,342 and $755,241 for the years ended December 31, 1996, 1995 and
1994, respectively. For further discussion, see Footnote No. 3.

Expenditures  for  maintenance  and repairs are expensed as incurred,  and major
renewals and betterments are capitalized.

The  Accelerated  Cost Recovery  System and Modified  Accelerated  Cost Recovery
System are used to calculate depreciation expense for tax purposes.

     (c)  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.

     (d)  Cash
          ----

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

     (e)  Cash - Security Deposits
          ------------------------

     Cash - security  deposits  represents  cash on deposit at Castle  Dore,  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).

     (f)  Interest in Joint Venture
          -------------------------

     The Partnership's  interest in affiliated joint venture is accounted for on
the equity method.



                                       21
<PAGE>

               REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP-III
                          NOTES TO FINANCIAL STATEMENTS
                                   (Continued)


3.   ACQUISITION AND DISPOSITIONS 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 February 1985,  the  Partnership  acquired a 190 unit apartment  complex
(Castle  Dore),  located  in  Indianapolis,  Indiana  for a  purchase  price  of
$3,711,683, which included $414,279 in acquisition fees. In connection with this
acquisition, the Partnership assumed a mortgage of approximately $2,578,000. The
mortgage bears interest at 7.5% and matures on September 1, 2014.

     In February 1985,  the  Partnership  acquired a 208 unit apartment  complex
(Parc  Bordeaux),  located in  Indianapolis,  Indiana,  for a purchase  price of
$3,845,064, which included $371,233 in acquisition fees.

     In June  1985,  the  Partnership  acquired  a 200  unit  apartment  complex
(Williamsburg  South  Apartments)  located in Atlanta,  Georgia,  for a purchase
price of $4,764,200,  which included $368,745 in acquisition fees. In connection
with this acquisition, the Partnership obtained from the seller a Purchase Money
Mortgage in the amount of $3,300,000.

     In August  1985,  the  Partnership  acquired an office  complex  containing
approximately  40,000 net  rentable  square  feet  (Perrymont  Office  Building)
located in Pittsburgh,  Pennsylvania,  for a purchase price of $2,078,697, which
included $168,697 in acquisition fees.

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

     In December 1985,  the  Partnership  acquired a 280 unit apartment  complex
(Ambassador Towers,  formerly Cedar Ridge) located in Monroeville,  Pennsylvania
for a purchase price of $6,423,391, which included $646,424 in acquisition fees.

     In August 1986, the  Partnership  sold the Bryn Mawr  Apartments for a sale
price of $3,110,000  which  generated a total net gain for  financial  statement
purposes of $1,475,313.  For income tax purposes,  the gain was recognized under
the installment method.

     In December 1988, the Partnership  sold the 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 was
recognized under the installment method.

     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.

                                       22
<PAGE>


               REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP-III
                          NOTES TO FINANCIAL STATEMENTS
                                   (Continued)


3.   ACQUISITION AND DISPOSITIONS OF RENTAL PROPERTY (Con't):
     --------------------------------------------------------

     In July of 1996,  the  Partnership  entered  into a plan to  dispose of the
property,  plant and equipment of Castle Dore  Apartments and Ambassador  Towers
with  carrying  amounts of  $1,891,232  and  $3,482,903  at December  31,  1996,
respectively.  Management has determined that a sale of the properties is in the
best  interests  of the  investors  of  RPILP  III.  As of  December  31,  1996,
agreements,  cancelable by the buyer,  have been signed with  anticipated  sales
prices of $5,500,000 and $5,800,000,  respectively.  It is anticipated  that the
sales will take place during 1997. Castle Dore earned net income of $10,614, and
Ambassador Towers incurred a net loss of $207,810 during the year ended December
31, 1996.

     Financial  Accounting  Standards  Statement  No.  121,  Accounting  for the
Impairment of Long-lived Assets and for Long-lived Assets to be Disposed Of (the
"Statement") requires that assets to be disposed of, be recorded at the lower of
carrying  value or fair value,  less costs to sell.  The Statement also requires
that such assets not be depreciated  during the disposal  period,  as the assets
will be recovered  through sale rather than through  operations.  In  accordance
with this Statement, the long-lived assets of the properties are recorded at the
carrying amount which is the lower of carrying value or fair value less costs to
sell, and have not been  depreciated  during the disposal  period.  Depreciation
expense,  not recorded during the disposal  period,  for the year ended December
31, 1996 totaled approximately $133,000.

4.   MORTGAGES PAYABLE:
     ------------------

     The Partnership has the following mortgages payable:

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

     A 7.5% U.S. Housing and Urban Development  (HUD) guaranteed  mortgage which
provides for annual principal and interest payments of $216,024 payable in equal
monthly  installments  through  February  1, 2010.  The  carrying  amount of the
mortgage  was   $1,536,666  and  $1,560,337  at  December  31,  1996  and  1995,
respectively,  reflecting  an  unamortized  discount  of  $579,685  for 1996 and
$611,052  for 1995.  The  discount  is based on an imputed  rate of 12.5% and is
being  amortized  using  the  interest  method  over the  remaining  term of the
mortgage.

     Williamsburg South
     ------------------

     A 12.85% mortgage which provides for annual principal and interest payments
of $341,604  payable in equal monthly  installments  through  December 1999. The
mortgage  has a balance of $0 and  $2,423,287  at  December  31,  1996 and 1995,
respectively.  This  property  was sold in December of 1996 and the  outstanding
balance of the mortgage was paid in full.



                                       23
<PAGE>


               REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP-III
                          NOTES TO FINANCIAL STATEMENTS
                                   (Continued)


3.   MORTGAGES PAYABLE (Con't.):
     ---------------------------

     Perrymont
     ---------

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

               Year      Rate       Payment
               ----      ----       -------
               1996     7.875 %     $ 9,660   (Principal and interest)
           1997 - 1998    8.5 %     $10,187   (Principal and interest)


     The outstanding  balance was $1,259,701 and $1,265,185 at December 31, 1996
and 1995, respectively. The mortgage matures in January 1999.

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

     A 7.75% mortgage which provides for annual principal and interest  payments
of $107,760  payable in equal monthly  installments  through April 1, 1998.  The
carrying  amount of the  mortgage of $467,891  and $520,759 at December 31, 1996
and 1995,  respectively reflects an unamortized discount of $42,300 for 1996 and
$54,168 for 1995.  The  discount is based on an imputed rate of 11% and is being
amortized using the interest method over the remaining term of the mortgage.

     A 8.75% mortgage which provides for annual principal and interest  payments
of $245,460 payable in equal monthly installments through May 2004. The carrying
amount of the mortgage of  $1,177,329  and  $1,285,661  at December 31, 1996 and
1995,  respectively,  reflects an  unamortized  discount of $84,414 for 1996 and
$101,835 for 1995.  The discount is based on an imputed rate of 11% and is being
amortized using the interest method over the remaining term of the mortgage.

     A mortgage with a balance of $989,413 and $997,994 at December 31, 1996 and
1995,  respectively,  which  was due  November  1996.  The  mortgage  calls  for
principal and interest payments of $9,621 at a rate of 10.75%.

     The previous three  mortgages were refinanced in March 1997 with a variable
rate mortgage for $3,263,000. The new mortgage provides for payments of interest
only through  August 1998 and monthly  installments  of  principal  and interest
thereafter  through  maturity at February 1, 2004.  The interest  rate is 8.275%
during the first loan year and is to be adjusted at the  beginning of the second
and seventh loan years to a rate equal to 2.40% plus the weekly average yield on
United  States  Treasury  Securities,  adjusted  to a constant  maturity of five
years.


                                       24
<PAGE>

               REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP-III
                          NOTES TO FINANCIAL STATEMENTS
                                   (Continued)


4.   MORTGAGES PAYABLE (Con't.):

     Pleasant Run Farms

     A 10.0% mortgage which provides for annual principal and interest  payments
of $245,352  payable in equal monthly  installments  through August 1, 1998. The
mortgage  has a balance of $0 and  $2,223,025  at  December  31,  1996 and 1995,
respectively.  This  property  was sold in December of 1996 and the  outstanding
balance of the mortgage was paid in full.

     The above mortgages are secured by the properties to which they relate.

     The  aggregate  maturities  of mortgages  and notes  payable,  after giving
effect to the refinancing, for each of the next five years 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
                                       ==============

5.   FAIR VALUE OF FINANCIAL INSTRUMENTS:
     ------------------------------------

     Statement of Financial  Accounting  Standards  No. 107 requires  disclosure
about fair value of certain  financial  instruments.  The fair value of accounts
receivable,  accounts payable, accrued expenses, deposit liabilities approximate
the carrying value due to the short-term nature of these instruments.

     The fair  value of the  mortgage  payable on Castle  Dore,  with a carrying
value  of  $1,536,666,  cannot  be  determined  because  it  is  uncertain  if a
comparable  mortgage could be obtained in the current  market.  See Note 4 for a
description of the terms of the mortgage payable.

     The fair value of the mortgage payable on Perrymont,  with a carrying value
of  $1,259,701,  cannot be  determined  because it is  uncertain if a comparable
mortgage could be obtained in the current market due to the poor occupancy level
at the property.


                                       25

<PAGE>

               REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP-III
                          NOTES TO FINANCIAL STATEMENTS
                                   (Continued)


5.   FAIR VALUE OF FINANCIAL INSTRUMENTS (Con't.):
     ---------------------------------------------

     Management  has  estimated  fair  value  of the  mortgages  payable  on the
following properties, based on currently available rates.

                                                                Carrying
Property                                                         Value

Ambassador Towers (formerly Cedar Ridge) (due April 1998)        $ 467,891
Ambassador Towers (formerly Cedar Ridge) (due May 2004)          1,177,321

     Management  has  estimated  that the fair value of the mortgage  payable on
Ambassador  Towers  (formerly Cedar Ridge) (due 1996)  approximates its carrying
value of $989,413 due to its short-term nature.

     The fair value of Accounts  Payable - Affiliates,  with a carrying value of
$208,156,  cannot  be  determined  because  it  is  uncertain  if  a  comparable
instrument could be obtained in the current market given the financial condition
of RPILP-III.

6.   INVESTMENT IN JOINT VENTURE:
     ----------------------------

     In April 1985, the Partnership entered into an agreement and formed 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,  manufacture,  salvage,  repair,
exhibit,  repacking,  relabeling,  and  re-export.  Under the terms of the Joint
Venture  Agreement,  the  Partnership  supplied  capital to acquire the land and
undertake  initial  development,  to the  extent of  $545,000  in Phase I and an
additional $275,000 on Phase II.

     The Other Joint  Venturer  delivered  or  completed  on behalf of the Joint
Venture all plans,  specifications,  maps,  surveys,  accounting  proformas  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 received or loss incurred.

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

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

                                       26
<PAGE>

               REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP-III
                          NOTES TO FINANCIAL STATEMENTS
                                   (Continued)


6.   INVESTMENT IN JOINT VENTURE (Con't.):

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

     o   Any remaining amount will be divided equally.

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

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

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

     o   Thereafter,  any  remaining  net  proceeds  will be divided 50% to the
         Partnership and 50% to the Other Joint Venturer.

     o   A  summary of the assets,  liabilities,  and  partners'  capital of the
         Joint  Venture as of December  31, 1996 and 1995 and the results of its
         operations for the years ended  December 31, 1996,  1995 and 1994 is as
         follows:



















                                       27
<PAGE>


               REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP-III
                          NOTES TO FINANCIAL STATEMENTS
                                   (Continued)


6.   INVESTMENT IN JOINT VENTURE (Con't.):
     -------------------------------------

                         INDUCON JOINT VENTURE - AMHERST
                                 BALANCE SHEETS
                           December 31, 1996 and 1995

Assets                                                    1996           1995
                                                       ----------     ----------

Land, at cost                                          $  177,709     $  177,709
Land improvements                                         246,232        221,399
Building                                                3,074,733      3,072,913
Equipment                                                   8,466          8,466
Furniture and fixtures                                      2,101          2,101
                                                       ----------     ----------
                                                        3,509,241      3,482,588
Less accumulated depreciation                           1,205,207      1,074,688
                                                       ----------     ----------
Property, net                                           2,304,034      2,407,900

Cash and cash equivalents                                    --          157,789
Other assets                                               41,665         39,925
Deferred debt expense, net of accumulated
  amortization of $293,490 and $266,350,
   respectively                                            23,315         28,841
                                                       ----------     ----------

Total assets                                           $2,369,014     $2,634,455
                                                       ==========     ==========

Liabilities and Partners' Capital

Liabilities:
  Cash overdraft                                       $   34,817     $     --
  Bonds payable                                         1,849,245      2,040,000
  Mortgage payable                                        260,450        292,033
  Accounts payable and accrued expenses                   128,072         87,679
  Amounts due to affiliates                                63,240         31,906
                                                       ----------     ----------
Total liabilities                                       2,335,824      2,451,618
                                                       ----------     ----------

Partners' Capital:
  The Partnership                                          25,156        167,321
  The Other Joint Venturer                                  8,034         15,516
                                                       ----------     ----------
Total Partners' Capital                                    33,190        182,837
                                                       ----------     ----------

Total Liabilities and Partners' Capital                $2,369,014     $2,634,455
                                                       ==========     ==========



                                       28
<PAGE>

               REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP-III
                          NOTES TO FINANCIAL STATEMENTS
                                   (Continued)


6.   INVESTMENT IN JOINT VENTURE (Con't.):


                        INDUCON JOINT VENTURE - AMHERST
                            STATEMENTS OF OPERATIONS
              FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

                                             1996         1995           1994
                                          ---------     ---------     ---------
Income:
  Rental                                  $ 444,649     $ 458,357     $ 400,690
  Interest and other                         23,696        11,391         8,626
                                          ---------     ---------     ---------
  Total Income                              468,345       469,748       409,316
                                          ---------     ---------     ---------

Expenses:
  Property operations                       148,652       164,069       220,117
  Interest
    Paid to affiliates                        5,573          --            --
    Other                                   208,744       183,104       187,821
  Depreciation and amortization             191,839       187,248       171,382
  Administrative:
    Paid to affiliates                       20,348        27,049          --
    Other                                    42,836         6,907         3,164
                                          ---------     ---------     ---------
  Total Expenses                            617,992       568,377       582,484
                                          ---------     ---------     ---------

Net loss                                   (149,647)      (98,629)     (173,168)
                                          =========     =========     =========

Allocation of net loss:
  The Partnership                          (142,165)      (93,698)     (164,510)
  Other Joint Venturer                       (7,482)       (4,931)       (8,658)
                                          ---------     ---------     ---------

                                          ($149,647)    ($ 98,629)    ($173,168)
                                          =========     =========     =========

     A reconciliation of the Partnership's investment in the Joint Venture is as
follows:

<TABLE>
<CAPTION>
                                                        1996         1995         1994
                                                   ---------    ---------    ---------
<S>                                                <C>          <C>          <C>
Investment in joint venture at beginning of year   $ 167,321    $ 261,019    $ 440,529
Distributions                                           --           --        (15,000)
Allocation of net loss                              (142,165)     (93,698)    (164,510)
                                                   ---------    ---------    ---------

Investment in joint venture at end of year         $  25,156    $ 167,321    $ 261,019
                                                   =========    =========    =========
</TABLE>





                                       29
<PAGE>


               REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP-III
                          NOTES TO FINANCIAL STATEMENTS
                                   (Continued)


7.   PROPERTY MANAGEMENT FEES AND RELATED PARTY TRANSACTIONS:
     --------------------------------------------------------

     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
average  adjusted  capital  contributions.  This fee totaled $2,925 for the year
ended December 31, 1994. There were no such fees for 1996 and 1995.

     The General Partners are also allowed to collect property  disposition fees
upon the 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  of 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 the Bryn Mawr  Apartments or Parc Bordeaux,  as the Limited  Partners of
the  Partnership  have not  received  a return of 7% on their  average  adjusted
capital or their original capital as defined in the partnership  agreement.  The
fee earned in the sale of the Bryn Mawr  Apartments,  Parc Bordeaux  Apartments,
Williamsburg  South  Apartments and Pleasant Run Apartments will not be recorded
as  liabilities  in the  partnership  financial  statements  until  such time as
payment is probable.

     Management  fees for the properties are paid to an affiliate of the General
Partners.  The management agreement provides for 5% of gross monthly receipts of
the  properties  to be paid as fees  for  administering  the  operations  of the
properties.  These fees  totaled  $217,095,  $227,134 and $223,083 for the years
ended December 31, 1996, 1995 and 1994, respectively.

     Computer  service  charges  for the  Partnership  are paid or accrued to an
affiliate of the General Partners. The fee is based upon the number of apartment
units and totaled  $14,040 for each of the years ended  December 31, 1996,  1995
and 1994.

                                       30
<PAGE>


               REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP-III
                          NOTES TO FINANCIAL STATEMENTS
                                   (Continued)


7.   PROPERTY MANAGEMENT FEES AND RELATED PARTY TRANSACTIONS (Con't.):
     -----------------------------------------------------------------

     Pursuant to the terms of the partnership  agreement,  the Corporate General
Partner charged 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 such costs and expenses which include payroll,  legal,  rent,
depreciation,  printing,  mailing,  travel,  and communication  costs related to
partnership accounting, partner communication and relations, property marketing,
and  refinancing  and  are  included  in  property   operations.   Additionally,
Partnership accounting and portfolio management fees, investor services fees and
brokerage  fees are  allocated  based on total  assets,  number of partners  and
number of units,  respectively.  Such  charges  totaled  $178,372,  $269,236 and
$115,233, respectively.

     The  Corporate  General  Partner is  entitled to a  continuing  Partnership
Management  Fee  equal to 7% of net cash  flow (as  defined  in the  Partnership
Agreement),  of which 2% is subordinated to the receipt by the Limited  Partners
of a  non-cumulative  annual  cash  return  equal to 7% of the  average of their
adjusted Capital  Contributions (as defined in the Partnership  Agreement).  The
Corporate General Partner is paid its 5% Partnership  Management Fee annually as
cash flow allows. The 2% subordinated fee will not be paid or accrued until such
time as the Limited  Partners have  received  their 7% return and payment of the
fee becomes  probable.  No fee was paid for December 31, 1996 and 1995.  The fee
totaled $2,925 for December 31, 1994.

     Accounts  payable to  affiliates  amounted to $208,156  and  $1,258,243  at
December  31,1996 and 1995,  respectively.  The payables  represent fees due and
advances  from the  Corporate  General  partner or an affiliate of the Corporate
General Partner.  Interest charged on amounts due affiliates  totaled  $149,954,
$101,378 and $45,590 for the years ended  December 31, 1996,  1995 and 1994, and
was calculated at a rate of 11% of the average  balance.  All amounts payable to
affiliates are payable upon demand.


8.   LEASES:
     -------

     In connection  with its commercial  property,  the  partnership has entered
into lease agreements with terms of one to five years. Minimum future rentals to
be received for each of the next five years under noncancelable operating leases
are as follows:

                     Year                     Amount

                     1997                     $195,324
                     1998                      121,599
                     1999                       55,704
                     2000                       18,700
                     2001                        7,792

<PAGE>


               REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP-III
                          NOTES TO FINANCIAL STATEMENTS
                                   (Continued)


9.   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 the
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 years ended December 31, 1996, 1995
and 1994,  as reported in the statement of  operations,  and as reported for tax
return purposes is as follows:

<TABLE>
<CAPTION>
                                                     1996           1995           1994
                                                 -----------    -----------    -----------
<S>                                              <C>            <C>            <C>
Net income (loss) -
  Statements of operations                       $ 2,430,990    $(1,392,983)   $(1,207,747)

Add to (deduct from):
  Difference in depreciation                        (310,146)       (85,765)      (159,067)

  Difference in amortization                          65,724         65,723         63,989

  Difference in gain on sale of properties           966,637           --             --

  Non deductible expenses / non taxable income      (246,668)       251,582         64,333

  Difference in loss of joint venture                 34,027          6,449         22,147
                                                 -----------    -----------    -----------

Net income (loss) - tax return purposes          $ 2,940,564    $(1,154,994)   $(1,216,345)
                                                 ===========    ===========    ===========
</TABLE>















                                       32
<PAGE>


               REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP-III
                          NOTES TO FINANCIAL STATEMENTS
                                   (Continued)


9.   INCOME TAXES (Con't.):
     ----------------------

     The  reconciliation  of  Partners'  (Deficit)  Capital  for the years ended
December  31,  1996,  1995 and 1994,  as reported  in the  balance  sheet and as
reported for tax return purposes, is as follows:

<TABLE>
<CAPTION>

                                                    1996           1995           1994
                                               -----------    -----------    -----------
<S>                                            <C>            <C>            <C>
Partners' Capital (Deficit)  - Balance Sheet   $ 2,126,834    $  (304,156)   $ 1,088,827

Add to (deduct from):
  Accumulated difference in depreciation        (4,234,796)    (3,924,650)    (3,838,885)
  Accumulated amortization of
    mortgage discounts                              77,418         11,694        (54,030)
  Syndication fees and selling expenses          1,842,060      1,842,060      1,842,060
  Gain on sale of properties                       149,545       (817,092)      (817,092)
  Other nondeductible expenses /
    non taxable income                             560,087        806,755        555,173
  Difference in book and tax
    depreciable cost basis                         915,085        915,085        915,085
  Difference in book and tax
    basis of investments                          (709,573)      (743,600)      (750,049)
  Other                                            (69,286)       (69,286)       (69,286)
                                               -----------    -----------    -----------

Partners' Capital (Deficit) - tax return
  purposes                                     $   657,374    $(2,283,190)   $(1,128,197)
                                               ===========    ===========    ===========

</TABLE>


10.  SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
     -------------------------------------------------

                                         1996            1995            1994
                                      ----------      ----------      ----------

Cash paid for interest                $1,153,734      $1,072,197      $1,074,458
                                      ==========      ==========      ==========

11.  GOING CONCERN CONSIDERATIONS:
     -----------------------------

     The  Partnership's  failure to meet its  Department  of  Housing  and Urban
Development (HUD) regulatory agreement  requirements,  its recurring losses from
operations,  and continuing cash flow difficulties raise substantial doubt about
the Partnership's ability to continue as a going concern.

     The consequences of the HUD non-compliance  could include sanctions such as
fines  or  interest  charges.  Additionally,  the  violation  of the  regulatory
agreement could be deemed an event of default by the Partnership.


                                       33
<PAGE>


               REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP-III
                          NOTES TO FINANCIAL STATEMENTS
                                   (Continued)


11.  GOING CONCERN CONSIDERATIONS (Con't.):
     --------------------------------------

     Because of the  uncertainty  surrounding  the default on the HUD guaranteed
mortgage, the Partnership's  recurring losses from operations and operating cash
flow difficulties,  substantial doubt exists about the Partnership's  ability to
continue as a going concern.

     Management is continuing its efforts to reduce expenses and increase rents.
In addition,  management  is currently  negotiating  a sale of the assets of the
Castle Dore Apartments and Ambassador Towers as discussed in Footnote 3, and has
responded  to HUD  regarding  the  aforementioned  noncompliance  including  its
intentions to remedy the situation.


12.  RECLASSIFICATIONS:
     ------------------

     Certain  reclassifications  have been made to the 1994  balances to conform
with the classifications used in 1995.






















                                       34
<PAGE>


SCHEDULE II



                REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP-III
                        Valuation and Qualifying Accounts
                For the Year Ended December 31, 1996, 1995, and 1994
<TABLE>
<CAPTION>
                                                     Additions
                                                 ------------------------
                                                              Charged to
                                     Balance     Charged to   Other                          Balance
                                     Beginning   Costs and    Accounts -     Deductions -   at End of
Description                          of Period   Expenses     Described      Described       Period
<S>                                  <C>          <C>          <C>           <C>           <C>
Year ended December 31, 1996
  Unamortized discounts on
    mortgages payable                 $ 767,055   $    -       $    -        $ 60,656 (1)  $ 706,399 (2)
                                      =========   =========    ===========   ========      =========
Year ended December 31, 1995
  Unamortized discounts on
    mortgages payable                 $ 832,778   $    -       $    -        $ 65,723 (1)  $ 767,055 (2)
                                      =========   =========    ===========   ========      =========
Year ended December 31, 1994
  Unamortized discounts on
    mortgages payable                  $896,767   $    -       $    -        $ 63,989 (1)  $ 832,778 (2)
                                      =========   =========    ===========   ========      =========
</TABLE>



(1)  Amortization charged to operations

(2)  Discounts to be amortized over the remaining term of the mortgage.






























                                       35

<PAGE>

SCHEDULE III

<TABLE>
<CAPTION>
                                                      REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP-III
                                                           REAL ESTATE AND ACCUMULATED DEPRECIATION
                                                                       DECEMBER 31, 1996

                                                                                                                        Depreciation
                                   Initial Cost to                    Gross amounts at which                              In Latest
                                     Partnership        Cost        Carried at Close of Period                            Statement
                                -------------------   Capitalized  -----------------------------  (3)(4)                     Of
    Property                                         Subsequent to                      (1)(2)  Accumulated   Date of    Operations
  Description      Encumbrances  Land     Buildings   Acquisition  Land    Buildings    Total  Depreciation Construction Is Computed
<S>                 <C>         <C>       <C>          <C>      <C>       <C>         <C>         <C>             <C>      <C>
Castle Dore Apts.
  Indianapolis, IN  $1,536,666  $335,000  $2,837,932   $27,348  $335,000  $2,865,280  $3,200,280  $1,309,048      2/85     25 Years

Perrymont Office
  Bldg.
  Pittsburgh, PA     1,259,701  100,000   1,978,788     56,138   100,000   2,034,926   2,134,926     912,829      8/85     25 Years

Ambassador Towers
  (formerly Cedar
  Ridge Apts.)
  Pittsburgh, PA     2,634,633  500,000   5,001,729    130,528   500,000   5,132,253   5,632,253   2,149,353     12/85     25 Years
                   ------------ --------  ---------- ---------- --------- ----------- ----------- -----------

                    $5,431,000  $935,000  $9,818,449  $214,014  $935,000  $10,032,459 $10,967,459 $4,371,230
                   ============ ========  ========== ========== ========= =========== =========== ===========

Inducon Joint
  Venture - Amherst
  Amherst, NY       $2,109,695  $177,709  $        - $3,320,965 $177,709  $3,320,965  $3,498,674  $1,194,639      4/85     25 Years
                   ============ ========  ========== ========== ========= =========== =========== ===========
</TABLE>

                                                                          36
<PAGE>

SCHEDULE III
   (Continued)


               REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP III
                    REAL ESTATE AND ACCUMULATED DEPRECIATION
                                DECEMBER 31, 1996


(1) Cost for Federal income tax purposes is $10,967,459.


(2) A reconciliation of the carrying amount of land,  buildings and improvements
as of December 31, 1996, 1995 and 1994 is as follows:

                                                   Partnership Properties

                                          1996            1995           1994
                                     ------------    ------------   ------------
Balance at beginning of period       $ 18,648,605    $ 18,476,919   $ 18,278,366
Additions                                   7,307         171,686        198,553
Dispositions                           (7,688,453)           --             --
                                     ------------    ------------   ------------
Balance at end of period             $ 10,967,459    $ 18,648,605   $ 18,476,919
                                     ============    ============   ============


                                                Joint Venture Property

                                          1996            1995           1994
                                     ------------    ------------   ------------
Balance at beginning of period       $  3,472,021    $  3,454,909   $  3,452,506
Additions                                  26,653          17,112          2,403
                                     ------------    ------------   ------------
Balance at end of period             $  3,498,674    $  3,472,021   $  3,454,909
                                     ============    ============   ============


(3) A  reconciliation  of accumulated  depreciation for the years ended December
31, 1996, 1995 and 1994 is as follows:

                                                Partnership Properties

                                          1996            1995           1994
                                     ------------    ------------   ------------
Balance at beginning of period          $ 7,061,771    $ 6,349,299   $ 5,674,528
Additions charged to cost and expenses
  during the period                         449,241        712,472       674,771
Dispositions                             (3,139,782)          --            --
                                     ------------    ------------   ------------
Balance at end of period                $ 4,371,230    $ 7,061,771   $ 6,349,299
                                        ===========    ===========   ===========

                                                 Joint Venture Property

                                               1996           1995          1994
                                        -----------    -----------   -----------
Balance at beginning of period          $ 1,062,437    $   939,174   $   807,595
Additions charged to cost and expenses
  during the period                         132,202        123,263       131,579
                                        -----------    -----------   -----------
Balance at end of period                $ 1,194,639    $ 1,062,437   $   939,174
                                        ===========    ===========   ===========


(4)  Balance applies entirely to buildings and improvements.

                                       37
<PAGE>


                                   SIGNATURES


     Pursuant  to the  requirements  of  Section  13 or 15(d) 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                             3/28/97
         -------------------------------------------       ---------------
            JOSEPH M. JAYSON,                              Date
            Individual General Partner


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


      By: /s/ Joseph M. Jayson                              3/28/97
         --------------------------------------------       ---------------
            JOSEPH M. JAYSON, President                     Date
            Principal Executive Officer and Director

          /s/ Michael J. Colmerauer                         3/28/97
         --------------------------------------------       ---------------
            MICHAEL J. COLMERAUER,                          Date
            Secretary



By:  _____________________________              ____________________
     JOSEPH M. JAYSON,                      Date
     Individual General Partner


     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
report  has  been  signed  below  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

     -------------------------------            --------------------
     JOSEPH M. JAYSON,                      Date
     President and Director

     -------------------------------            --------------------
     MICHAEL J. COLMERAUER             Date
     Secretary

                                       38

<PAGE>


     Supplemental Information to be Furnished with Reports Filed Pursuant to
Section 15(d) of the Act by Registrants Which Have Not Registered Securities
Pursuant to Section 12 of the Act.

     The form  10-K is sent to  security  holders.  No other  annual  report  is
distributed.  No  proxy  statement,  form of proxy  or  other  proxy  soliciting
material was sent to any of the  registrant's  security  holders with respect to
any annual or other meeting of security holders.

























                                       39