Exhibit 10.2 - Fairness Opinion


    

      
        	
                Jackson
                  Claborn, Inc.

              


      

      ·
        Real
        Estate Consulting and Appraisal Services ·

      ·
        Plano,
        Texas ·
        Southlake, Texas · 

      www.jacksonclaborn.com

      Jimmy
        H.
        Jackson, MAIDavid
        Claborn, MAI

      Allen
        W.
        Gardiner, SRADod
        W.
        Clapp, SRA

      


      December
        27,
        2006

       

      United
        Development Funding III, L.P.

      1702
        N.
        Collins Boulevard

      Suite
        100

      Richardson,
        Texas 75080

      


      Attn:
         Mr.
        Jeff
        Shirley, President

        UMTH
        Land
        Development, L.P.,

      It’s
        general partner 

      


      


      Ladies
        and Gentlemen:

      


            You
        have
        requested our opinion as an independent advisor (as that term is defined
        in the
        Prospectus of United Development Funding III, L.P. dated May 15, 2006) as
        to the
        fairness of the terms of that certain note to be dated on or about December
        27,
        2006 amongst and between United Development Funding III, L.P., a Delaware
        limited partnership, and United Development Funding, L.P., a Nevada limited
        partnership (“UDF”). Pursuant to the terms of this note (the “UDF Note”), UDF
        III will advance to UDF the amount of up to $6,328,010.00 that matures June
        21,
        2007 at an interest rate of 12%. 

      


      UDF
        is a
        private real estate finance company with offices in Richardson and Bedford,
        Texas. As of month end November 2006, UDF had assets of $97,677,733, senior
        debt
        of $28,847,861, subordinated debt of $35,334,289 and equity of $32,862,452,
        and net income of $8,531,326. 

      


      We
        understand that the terms of the UDF Note are as follows:

      


      Loan
        Amount:  Up
        to
        $6,328,010.00.

      


      Interest
        Rate:  12%.

      


      Term:   Matures
        June 21, 2007.


      


      We
        further understand that these terms, as well as all other terms and fees,
        are
        exactly the same as the terms of the note by UDF to UDF Tx One, L.P., a Texas
        limited partnership, with respect to a loan closed in June 2006 (the “UDF Tx One
        Note”).

      


      The
        UDF
        Note is a direct obligation of UDF. In addition, UDF III will have a 1st
        lien on
        190 platted lots in our existing master planned community that will be
        substantially developed by the end of 2007 and located in the Denver north
        sub
        market. With the UDF Note, UDF III is advancing approximately 100% loan-to-cost
        and 81% loan-to-value. Additionally, a top five national homebuilder has
        optioned to purchase the land by a date no later than June 21, 2007 and is
        paying a monthly option fee to UDF Tx One in an amount at least equal to
        the
        monthly interest to be paid on the UDF Note. Further, UDF has equity of
        $32,862,452, and net income of $8,531,326 through month end November 2006.
        

      


      We
        are a
        full service real estate appraisal and consulting firm. As part of our real
        estate appraisal and consulting services, we are regularly engaged in the
        consultation with regard to real estate value and finance.

      


      We
        are
        acting as an independent advisor to United Development Funding III, L.P.
        in
        connection with the UDF Note and will receive a fee for our services. The
        opinion fee is not contingent upon the consummation of the described
        transaction. In addition, UMTH Land Development, L.P. has agreed to indemnify
        us
        for certain liabilities arising out of our engagement. 

      


      In
        the
        course of performing our review and analysis for rendering this opinion,
        we
        have: (i) reviewed the terms of the UDF Note, (ii) reviewed the terms of
        the UDF
        Tx One Note, (iii) reviewed materials provided to us by members of the senior
        management of UDF III with respect to the described transaction;
        (iv) conducted discussions with members of the senior management of UDF III
        with respect to the described transaction; and (v)  conducted such other
        financial studies, analyses and investigations and considered such other
        information as we deemed appropriate. 

      


      With
        respect to the data and discussions relating to the transaction, we have
        assumed, at the direction of management of UDF III and without independent
        verification, that such data has been reasonably prepared on a basis reflecting
        the best currently available estimates and judgments of UDF III. We have
        further
        relied on the assurances of senior management of UDF III that they are unaware
        of any facts that would make such information incomplete or misleading.


      


           
         In
        rendering our opinion, we have assumed and relied upon the accuracy and
        completeness of the financial, legal, tax, operating and other information
        provided to us by UDF III, and have not assumed responsibility for independently
        verifying and have not independently verified such information. We have not
        assumed any responsibility to perform, and have not performed, an independent
        evaluation or appraisal of any of the respective assets or liabilities
        (contingent or otherwise) involved in the contemplated transaction. In addition,
        we have not assumed any obligation to conduct, and have not conducted, any
        physical inspection of the property involved in the contemplated transaction.
        Additionally, we have not been asked and did not consider the possible effects
        of any litigation or other legal claims. 

      


           
         Our
        opinion is subject to the assumptions and conditions set forth herein, speaks
        only as of the date hereof, is based on market, economic, financial, legal
        and
        other conditions as they exist and information which we have been supplied
        as of
        the date hereof, and is without regard to any market, economic, financial,
        legal
        or other circumstances or events of any kind or nature which may exist or
        occur
        after such date. We have not undertaken to reaffirm or revise this opinion
        or
        otherwise comment upon any events occurring after the date hereof and do
        not
        have any obligation to update, revise or reaffirm our opinion.

       

           
         Our
        opinion expressed herein is provided for the information and assistance of
        the
        senior management of UDF III in connection with its consideration of the
        UDF
        Note. 

      


      Our
        opinion does not address the merits of the underlying decision by UDF III
        to
        undertake the UDF Note.

      


           
         Our
        opinion addresses solely the fairness of the terms of the UDF Note.


      


           
         Based
        on
        and subject to the foregoing, including the various assumptions and limitations
        set forth herein, it is our opinion that, as of the date hereof, that
the
        terms
        of the UDF Note are
        fair
        and at least as favorable to UDF III as such transaction with an unaffiliated
        party in similar circumstances. 

      


      


      Sincerely,
        

      


      /s/
        Jackson Claborn, Inc.

      


      Jackson
        Claborn, Inc.