<PAGE>

--------------------------------------------------------------------------------

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                               -----------------

                                    FORM 10-Q

              [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2001

              [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

               For the Transition Period from _______ to ________

                               -----------------

                         Commission File Number 1-14373

                         INSIGNIA FINANCIAL GROUP, INC.
             (Exact Name of Registrant as Specified in Its Charter)

        DELAWARE                                       56-2084290
(State of Incorporation)                   (I.R.S. Employer Identification No.)

  200 PARK AVENUE, NEW YORK, NEW YORK                    10166
(Address of Principal Executive Offices)               (Zip Code)

                                 (212) 984-8033
              (Registrant's Telephone Number, Including Area Code)

                               -----------------

Indicate by 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_____

At November 1, 2001, the Registrant had 22,410,863 shares of Common Stock
outstanding.

--------------------------------------------------------------------------------

<PAGE>

                         INSIGNIA FINANCIAL GROUP, INC.

                                    FORM 10-Q

                    FOR THE QUARTER ENDED SEPTEMBER 30, 2001

                                -----------------
                                      INDEX
                                -----------------

<TABLE>
<CAPTION>
                                                                                     Page
                                                                                     ----
<S>                                                                                 <C>
PART I--FINANCIAL INFORMATION

      Item 1.  Financial Statements

           Condensed Consolidated Statements of Operations for the
              Three and Nine Months Ended September 30, 2001 and 2000 ............     2

           Condensed Consolidated Balance Sheets                                       4
               at September 30, 2001 and December 31, 2000........................

           Condensed Consolidated Statements of Cash Flows                             5
               for the Nine Months Ended September 30, 2001 and 2000..............

           Notes to Condensed Consolidated Financial Statements...................     7

      Item 2.  Management's Discussion and Analysis of                                20
                 Financial Condition and Results of Operations....................

      Item 3.  Quantitative and Qualitative Disclosure of Market Risk.............    28

PART II--OTHER INFORMATION

      Item 1.  Legal Proceedings..................................................    29

      Item 4.  Submission of Matters to a Vote of Security Holders................    29

      Item 6.  Exhibits and Reports on Form 8-K...................................    29

SIGNATURES                                                                            30
</TABLE>


<PAGE>

                         PART I - FINANCIAL INFORMATION
                         ------------------------------

Item 1. Financial Statements
----------------------------

                         INSIGNIA FINANCIAL GROUP, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                 (In thousands)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                              THREE MONTHS ENDED               NINE MONTHS ENDED
                                                                 SEPTEMBER 30                     SEPTEMBER 30
                                                                 ------------                     ------------
                                                            2001             2000             2001            2000
                                                            ----             ----             ----            ----
                                                                            (Note)                           (Note)
<S>                                                     <C>              <C>              <C>             <C>
REVENUES
  Real estate services                                    $ 176,784       $  202,343       $  569,486      $  599,916
  Property operations                                           720            1,509            3,189           3,453
                                                        ------------     ------------     ------------    ------------
                                                            177,504          203,852          572,675         603,369
                                                        ------------     ------------     ------------    ------------
COSTS AND EXPENSES
  Real estate services                                      167,954          179,032          526,408         537,191
  Property operations                                           491            1,193            2,376           2,846
  Internet-based businesses                                      --            2,984               --          15,211
  Indemnity settlement                                           --               --            1,500              --
  Administrative                                              2,399            3,757            8,781          11,563
  Depreciation                                                4,875            2,356           13,971           9,996
  Property depreciation                                         316              476              810           1,013
  Amortization of intangibles                                 6,342            6,533           20,020          19,310
                                                        ------------     ------------     ------------    ------------
                                                            182,377          196,331          573,866         597,130
                                                        ------------     ------------     ------------    ------------
  Operating income (loss)                                    (4,873)           7,521           (1,191)          6,239

OTHER INCOME AND EXPENSES:
  Gain on life insurance proceeds                                --           19,100               --          19,100
  Gain on sale of marketable securities                          --              888               --             888
  Provisions for loss on Internet investments                (1,779)          (2,294)          (8,920)         (2,294)
  Interest and other income                                   1,380            1,854            4,919           4,666
  Interest expense                                           (3,385)          (3,629)         (10,681)         (9,417)
  Foreign currency gains                                         17            1,167              356           2,448
  Equity earnings in real estate ventures                       234              250            1,288           2,891
  Minority interests                                             --               --                              900
                                                        ------------     ------------     ------------    ------------
                                                             (3,533)          17,336          (13,038)         19,182
                                                        ------------     ------------     ------------    ------------
Income (loss) before income taxes and cumulative
  effect of a change in accounting principle                 (8,406)          24,857          (14,229)         25,421

(Provision) benefit for income taxes                          3,936           (1,067)           5,780          (7,155)
                                                        ------------     ------------     ------------    ------------
Income (loss) before cumulative effect of a change in
  accounting principle                                       (4,470)          23,790           (8,449)         18,266

Cumulative effect of a change in accounting principle,
  net of applicable taxes                                        --               --               --         (30,420)
                                                        ------------     ------------     ------------    ------------
Net income (loss)                                            (4,470)          23,790           (8,449)        (12,154)
                                                        ------------     ------------     ------------    ------------
Preferred stock dividends                                      (250)            (250)            (750)           (640)
                                                        ------------     ------------     ------------    ------------
Net income (loss) available to common shareholders        $  (4,720)       $  23,540       $   (9,199)     $  (12,794)
                                                        ============     ============     ============    ============
</TABLE>



                                       2
<PAGE>


                         INSIGNIA FINANCIAL GROUP, INC.
           CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (continued)
                      (In thousands, except per share data)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                  THREE MONTHS ENDED            NINE MONTHS ENDED
                                                                                     SEPTEMBER 30                 SEPTEMBER 30
                                                                                     ------------                 ------------
                                                                                  2001          2000           2001          2000
                                                                                  ----          ----           ----          ----
                                                                                               (Note)                       (Note)
<S>                                                                            <C>            <C>           <C>           <C>
PER SHARE AMOUNTS:
  Earnings per common share - basic
                                                                                $ (0.21)       $  1.10       $ (0.42)      $   0.84
    Earnings before cumulative effect of a change in accounting principle      ==========     ==========    ==========    ==========
    Cumulative effect of a change in accounting principle                          --             --            --            (1.45)
                                                                               ==========     ==========    ==========    ==========
    Net income (loss)                                                           $ (0.21)       $  1.10       $ (0.42)      $  (0.61)
                                                                               ==========     ==========    ==========    ==========

  Earnings per common share - assuming dilution:
    Earnings before cumulative effect of a change in accounting principle       $ (0.21)       $  0.98       $ (0.42)      $   0.75
                                                                               ==========     ==========    ==========    ==========
    Cumulative effect of a change in accounting principle                          --             --            --            (1.25)
                                                                               ==========     ==========    ==========    ==========
    Net income (loss)                                                           $ (0.21)       $  0.98       $ (0.42)      $  (0.50)
                                                                               ==========     ==========    ==========    ==========

  Weighted average common shares and assumed conversions:
    Basic                                                                        22,214         21,338        21,932         21,095
                                                                               ==========     ==========    ==========    ==========
    Assuming dilution                                                            22,214         24,317        21,932         24,353
                                                                               ==========     ==========    ==========    ==========
</TABLE>

NOTE: The Statements of Operations for the three and nine months of 2000 have
      been restated in compliance with the adoption of a change in accounting
      principle (see Note 4).

--------------------------------------------------------------------------------
See Notes to Condensed Consolidated Financial Statements.



                                       3
<PAGE>


                         INSIGNIA FINANCIAL GROUP, INC.
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (In thousands)

<TABLE>
<CAPTION>
                                                                                  SEPTEMBER 30,         DECEMBER 31,
                                                                                      2001                 2000
                                                                                      ----                 ----
                                                                                  (Unaudited)             (Note)
<S>                                                                             <C>                  <C>
ASSETS
   Cash and cash equivalents                                                       $   50,086            $  124,527
   Receivables                                                                        137,302               183,819
   Mortgage loans held for sale                                                        14,458                11,443
   Restricted cash                                                                     26,651                 6,555
   Property and equipment, net                                                         71,500                74,502
   Real estate interests                                                               70,390               102,170
   Investments                                                                          5,332                10,458
   Property management contracts, net of amortization                                  17,302                22,357
   Costs in excess of net assets of acquired businesses, net of amortization          319,226               324,631
   Other assets                                                                        61,831                49,880
                                                                                -----------------     ----------------
Total assets                                                                       $  774,078            $  910,342
                                                                                =================     ================
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
  Accounts payable                                                                 $   11,093            $   28,282
  Commissions payable                                                                  43,285                71,688
  Accrued incentives                                                                   35,381                89,963
  Accrued and sundry liabilities                                                       82,229               114,653
  Loss in excess of investment                                                          3,110                 3,222
  Mortgage warehouse line of credit                                                    12,527                 9,502
  Notes payable                                                                       167,671               135,782
  Real estate mortgage notes payable                                                   15,796                48,369
                                                                                -----------------     ----------------
Total liabilities                                                                     371,092               501,461

Stockholders' Equity:
   Common Stock, par value $.01 per share - authorized 80,000,000 shares,
    22,382,602 (2001) and 21,573,928 (2000) issued and outstanding shares,
    net of 1,502,600 (2001 and 2000) shares held in treasury                              224                   216
   Preferred Stock, par value $.01 per share - authorized 20,000,000 shares,
    250,000 (2001 and 2000) issued and outstanding shares                                   3                     3
   Additional paid-in capital                                                         417,755               413,831
   Notes receivable for Common Stock                                                   (1,932)               (2,051)
   Retained (deficit) earnings                                                         (6,603)                2,846
   Accumulated other comprehensive loss                                                (6,461)               (5,964)
                                                                                -----------------     ----------------
Total stockholders' equity                                                            402,986               408,881
                                                                                -----------------     ----------------
Total liabilities and stockholders' equity                                         $  774,078            $  910,342
                                                                                =================     ================
</TABLE>


NOTE: The Balance Sheet at December 31, 2000 has been derived from the audited
      financial statements at that date but does not include all the information
      and footnotes required by accounting principles generally accepted in the
      United States for complete financial statements.

--------------------------------------------------------------------------------
See Notes to Condensed Consolidated Financial Statements.


                                       4
<PAGE>


                         INSIGNIA FINANCIAL GROUP, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                         NINE MONTHS ENDED
                                                                           SEPTEMBER 30
                                                                           ------------
                                                                    2001                   2000
                                                                    ----                   ----
                                                                                          (Note)
<S>                                                            <C>                   <C>
OPERATING ACTIVITIES
Net loss                                                         $  (8,449)            $  (12,154)
Cumulative effect of a change in accounting principle                   --                 30,420
                                                               ---------------       --------------
Income (loss) before cumulative effect of a change in
accounting principle                                                (8,449)                18,266

Adjustments to reconcile net loss to net cash
  (used in) provided by operating activities:
    Depreciation and amortization                                   34,801                 30,319
    Equity earnings in real estate ventures                         (1,288)                (2,891)
    Minority interests                                                  --                   (900)
    Foreign currency gains                                            (356)                (2,448)
    Gain on life insurance proceeds                                     --                (19,100)
    Gain on sale of marketable securities                               --                   (888)
    Provisions for loss on Internet investments                      8,920                  2,468
    Changes in operating assets and liabilities:
      Receivables                                                   45,547                (38,209)
      Other assets                                                 (11,314)                 2,777
      Accounts payable and accrued expenses                        (85,434)                 5,222
      Commissions payable                                          (28,406)                20,018
                                                               ---------------       --------------
Net cash (used in) provided by operating activities                (45,979)                14,634
                                                               ---------------       --------------
INVESTING ACTIVITIES
   Additions to property and equipment, net                        (11,494)               (24,390)
   Purchase of property for Internet-based businesses                   --                 (6,084)
   Investment in Internet-based businesses                          (3,795)               (14,813)
   Proceeds from sale of marketable securities                          --                  1,293
   Payments made for acquisition of businesses                      (9,753)                (9,953)
   Increase in mortgage loans held for sale                         (3,015)                (2,880)
   Investment in real estate                                        (7,157)               (30,195)
   Proceeds from sale of real estate properties                     40,240                     --
   Distributions from real estate investments                        4,821                 14,697
   Net increase in restricted cash                                 (19,371)                 7,346
                                                               ---------------       --------------
Net cash used in investing activities                           $   (9,524)            $  (64,979)
                                                               ---------------       --------------
</TABLE>



                                       5
<PAGE>


                         INSIGNIA FINANCIAL GROUP, INC.
           CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
                                 (In thousands)
                                   (Unaudited)


<TABLE>
<CAPTION>
                                                                  NINE MONTHS ENDED
                                                                     SEPTEMBER 30
                                                                     ------------
                                                                 2001            2000
                                                                 ----            ----
                                                                                (Note)
<S>                                                         <C>                <C>
FINANCING ACTIVITIES
    Proceeds from issuance of Common Stock                   $    1,243        $    2,032
    Proceeds from issuance of Preferred Stock, net                   --            24,949
    Proceeds from exercise of stock options                       2,077             1,813
    Dividend payments on Preferred Stock                         (1,000)               --
    Net advances on mortgage warehouse line of credit             3,025             3,429
    Payments on notes payable                                  (134,484)           (7,557)
    Proceeds from notes payable                                 145,168            16,374
    Debt issuance costs                                          (2,130)               --
    Payments on real estate mortgage notes payable              (33,086)               --
    Proceeds from real estate mortgage notes payable                513            17,211
                                                            -------------     -------------
Net cash (used in) provided by financing activities             (18,674)           58,251
                                                            -------------     -------------
  Effect of exchange rate changes in cash                           (14)           (1,081)
  Net (decrease) increase in cash and cash equivalents          (74,441)            6,825
  Cash and cash equivalents at beginning of period              124,527            61,600
                                                            -------------     -------------
  Cash and cash equivalents at end of period                 $   50,086        $   68,425
                                                            =============     =============
</TABLE>


NOTE: The Statement of Cash Flows for the nine months ended September 30, 2000
      has been restated in compliance with the adoption of a change in
      accounting principle (see Note 4).


--------------------------------------------------------------------------------
See Notes to Condensed Consolidated Financial Statements.


                                       6
<PAGE>

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
----------------------------------------------------------------

1.   Business

Organization

     Insignia Financial Group, Inc. ("Insignia" or the "Company"), a Delaware
corporation headquartered in New York, New York, is an international real estate
services company with operations throughout the United States and United Kingdom
as well as in continental Europe, Asia and Latin America. Insignia's principal
executive offices are located at 200 Park Avenue in New York, New York and the
telephone number there is (212) 984-8033.

     Insignia's real estate service businesses specialize in commercial real
estate services, apartment brokerage and leasing, single-family home brokerage,
mortgage origination, title services, escrow agency services, condominium and
cooperative apartment management, real estate oriented financial services,
fee-based development and redevelopment and other services. The Company's
principal real estate service businesses are Insignia/ESG, Inc. (U.S. commercial
real estate services - headquartered in New York), Insignia Richard Ellis (U.K.
commercial real estate services - headquartered in London), Insignia Douglas
Elliman (residential sales and rentals), Realty One, Inc. (single-family home
brokerage and mortgage origination) and Insignia Residential Group, Inc.
(condominium and cooperative apartment management).

     Insignia also has established commercial real estate service operations
throughout Europe, Asia and Latin America in the following locations: Frankfurt,
Germany; Milan, Italy; Madrid, Spain; Brussels, Belgium; Dublin, Ireland;
Belfast, Northern Ireland; Amsterdam, the Netherlands; Shanghai and Beijing,
China; Bangkok, Thailand; Tokyo, Japan; Hong Kong; Mumbai, Delhi, Bangalore and
Hyderabad, India; and Mexico City.

     The combined strength of the Company's operations headquartered in New York
and London gives Insignia a commanding position in two of the world's most
important global business centers. The evolving global business environment and
the prominence of New York and London as world financial capitals enhances the
transatlantic cross-selling opportunities between the Company's U.S. and U.K.
commercial operations. Insignia also enjoys overall market preeminence for
commercial and residential real estate services in New York through the leading
market positions of Insignia/ESG, Insignia Douglas Elliman and Insignia
Residential Group.

     In addition to traditional real estate services, Insignia engages in real
estate oriented investing through co-investment with institutional clients in
select real estate assets, principal development activities and real estate
oriented investment funds. In addition to asset related returns, the Company's
U.S. commercial services operations also generate revenues from fee-based
services provided to these real estate investment entities. The Company's real
estate service operations and real estate principal investment activities are
more fully described below.

Commercial Real Estate Services

     The Company's commercial real estate services are provided through
Insignia/ESG in the United States, Insignia Richard Ellis ("IRE") in the United
Kingdom and other Insignia subsidiaries in Europe, Asia and Latin America. The
Company's commercial services operations generated aggregate service revenues of
$399.4 million in the first nine months of 2001, representing 63% of the
Company's total service revenues for the period.

     United States

     All commercial real estate services in the U.S. are rendered under the
Insignia/ESG brand. Through Insignia/ESG, the Company is among the leading
providers of commercial real estate services in the U.S., with a leadership
position in the New York metropolitan marketplace and significant positions in
other major markets including Washington, D.C., Philadelphia, Boston, Chicago,
Atlanta, Phoenix, Los Angeles, San Francisco, Dallas and Miami. The Company
delivers its real estate services throughout the U.S. across geographic markets,
property types and disciplines. In all, the Company has more than 50 commercial
offices across the U.S.

     In order to broaden the geographic coverage of commercial services into
select U.S. markets where the Company does not have company-owned operations,
Insignia/ESG launched a Strategic Services Provider ("SSP") program in June
2001. Under the SSP program, the Company forges strategic alliances with leading
regional real


                                       7
<PAGE>

estate services companies which agree to adopt the Company's branding, marketing
and client service protocols, and to refer business outside its normal market to
Insignia/ESG. The SSP program is a low-cost way for the Company to maintain
consistency of service, while meeting clients' needs in small markets where the
Company has elected not to acquire an existing business or start a new
operation. The SSP program has been launched with three regional service
providers: Miller Corporate Real Estate Services of Baltimore, MD; Oxford Realty
Services of Pittsburgh, PA; and Morton G. Thalhimer of Richmond, VA (with
additional offices in Norfolk and Virginia Beach).

     The Company provides a broad spectrum of commercial real estate services
throughout the U.S. to corporations and other major space users, property owners
and investors. These services include tenant representation, property leasing
and management, property acquisition and disposition services, investment sales,
mortgage financing, equity co-investment, development, redevelopment and
consulting services. The Company serves tenants, owners and investors in office,
industrial, retail, hospitality and mixed-use properties, representing over 224
million square feet of commercial real estate. U.S. commercial real estate
services operations comprise the Company's largest business unit, accounting for
approximately 55%, or $315 million, of total service revenues for the first nine
months of 2001.

     United Kingdom and Mainland Europe

     The Company's European businesses consist of commercial real estate service
operations in the United Kingdom, Ireland, Germany, Italy, Belgium, the
Netherlands and Spain. The Company's expansion in Europe began in 1998 with the
acquisition of Richard Ellis Group Limited ("REGL") and was significantly
enhanced through the acquisition of St. Quintin Holdings Limited ("St. Quintin")
in 1999 and its successful integration with REGL into a single U.K. operation
with a leading market position in London. The Company's U.K. subsidiary is among
the three largest commercial real estate service providers in the United Kingdom
and the largest, based on market share for leasing activity, in central London.
The Company provides extensive coverage of the entire United Kingdom market
through full-service offices in London, Glasgow, Birmingham, Leeds, Manchester,
Liverpool and Jersey. The Company also holds an equity interest in an Irish real
estate services company with offices in in Dublin and Belfast. The Company's
U.K. operation provides broad-ranging real estate services, including agency
leasing, tenant representation, property sales and financing, consulting,
project management, appraisal, zoning and other general services. The major
income components are agency leasing, tenant representation and property sales
and financing.

     The U.K. operations are viewed as the springboard for the Company's
continued global expansion of the commercial real estate services platform.
Since 1998, the U.K. operation has assisted in the establishment of service
operations in Frankfurt, Germany; Dublin, Ireland; Milan, Italy; Brussels,
Belgium; Amsterdam, the Netherlands and Madrid, Spain. The other European
operations outside the U.K. are beginning to produce increasingly meaningful
contributions through the maturation of operations and expansion of service
capabilities throughout their markets. The Company's European commercial
services operations generated aggregate service revenues of $81.9 million in the
first nine months of 2001, representing 14% of the Company's total service
revenues for the period. The Company's U.K. operation continues to produce the
substantial majority of total European operations with 2001 revenues of $73.8
million through September.

     Asia

     The Company commenced operations in Asia during 2000 with the establishment
of an office in Tokyo, Japan in July 2000 and the acquisition of Brooke
International, a Hong Kong based commercial real estate services company
(founded in 1988), in December 2000. Insignia augmented its Asian reach in April
2001 with the acquisition of Brooke International's affiliated operations in
India. This business now operates as Insignia Brooke and employs more than 120
real estate professionals and support personnel in eight offices in Hong Kong,
China, Thailand and India. Insignia Brooke, along with the established presence
in Japan, provides the Company with a strategic platform from which to serve
existing clients in Asia, particularly in corporate real estate and investment
services, and is expected to create international cross-selling opportunities
with the U.S., U.K. and other European businesses.

     Latin America

     The Company extended its service capability into Latin America with the
March 2001 acquisition of Grupo Inmobiliario Inova S.A de C.V. ("Inova"). Inova,
headquartered in Mexico City and founded in 1992, is a commercial real estate
service company which provides acquisition advisory and due diligence services,
project coordination and supervision, real estate valuations, tenant
representation, asset management and strategic advisory services. Inova conducts
business throughout the major markets in Mexico and other leading business
centers of


                                       8
<PAGE>

South America, including Buenos Aires, Rio de Janeiro and Sao Paulo. The Company
views Inova as the platform from which to service its clients throughout Latin
America. This business now operates as Insignia/ESG de Mexico.

Real Estate Principal Investment Activities

     Co-investment and Development

     Insignia pursues opportunities to invest in operating real estate assets.
The Company identifies investment opportunities for select clients and invests
alongside of those clients in the purchase of qualifying properties.
Co-investment partners include Walton Street Real Estate Fund III, Citibank, ING
Barings, Blackacre Capital Management, The Witkoff Group, Lennar, Lone Star
Opportunity Fund, Prudential, GE Investments and Whitehall Street Real Estate.
As of September 30, 2001, Insignia held ownership in 36 co-investment
partnerships controlling over 10.4 million square feet of commercial property
and approximately 5,100 multi-family apartment and hotel units. The Company's
ownership interests in these partnerships range from 1% to 30%. The Company's
carrying value of these investments totaled approximately $29 million at
September 30, 2001.

     The Company is also the sole owner of two real estate properties with an
aggregate carrying value of approximately $18 million at September 30, 2001.
These properties, which are consolidated in the Company's financial statements,
include Brookhaven Village, a 155,000 square foot retail facility located in
Norman, Oklahoma, and Dolphin Village, a 136,000 square foot retail facility
located in St. Petersburg, Florida. The Company holds ownership interests
ranging from 25% to 33% in an office property under development and two parcels
of land held for development and solely owns one parcel of land also held for
development. The carrying value of development assets totaled approximately $13
million at September 30, 2001. Insignia is directing development activities on
all properties.

     Real Estate Investment Funds

       Insignia Opportunity Trust

     Insignia Opportunity Trust ("IOT") is an Insignia-sponsored private real
estate investment trust ("REIT") formed in 1999. IOT, through its subsidiary
operating partnership, Insignia Opportunity Partners ("IOP"), invests primarily
in secured real estate debt instruments and, to a lesser extent, in other real
estate debt and equity instruments, with a focus on below investment grade
commercial mortgage-backed securities. At formation, IOT received aggregate
capital commitments of $71 million (of which $9 million was committed by
Insignia and the remainder committed by third-party investors), which IOT in
turn committed to invest in IOP in exchange for an 88.75% general partner
interest in IOP. Insignia also committed to invest an additional $1 million
directly in IOP in exchange for (i) a 1.25% managing general partner equity
interest and (ii) a 10% non-subordinated promoted equity interest in IOP. All
capital commitments to IOT and IOP have been called and funded. Insignia has an
ownership interest of approximately 12% in IOT. Insignia's allocable earnings in
IOT totaled approximately $1.7 million for the nine months of 2001.

       Insignia Opportunity Partners II

     In September 2001, Insignia closed the capital-raising phase for a second
real estate investment fund, Insignia Opportunity Partners II ("IOP II"), with
$50 million of equity capital commitments from Insignia and third-party
investors. IOP II will invest primarily in collateralized mortgage-backed
securities, similar to the investment initiatives of IOT.

Residential Real Estate Services

     The Company's residential real estate services are performed in the U.S.
through the collective operations of Insignia Douglas Elliman, Realty One and
Insignia Residential Group. Through these businesses the Company provides a
diverse array of residential real estate services throughout northern Ohio and
the New York metropolitan area, including apartment brokerage and leasing,
single-family home brokerage, mortgage origination, title services, escrow
agency services and condominium and cooperative apartment management. The
Company's residential services operations generated aggregate service revenues
of $170.1 million in the first nine months of 2001, representing 30% of the
Company's total service revenues for the period.


                                       9
<PAGE>

     Residential Sales and Rentals

     Through Insignia Douglas Elliman, the Company operates a residential
cooperative, condominium and rental apartment brokerage and leasing firm in New
York City. Insignia Douglas Elliman commands the number one market position for
both residential sales and rentals in New York City according to the annual
ranking in the March 2001 issue of Crain's New York Business. In addition,
Insignia Douglas Elliman operates in upscale suburban markets through offices in
Greenwich and Darien, Connecticut, Bernardsville/Basking Ridge, New Jersey, and
Long Island (Manhasset, Locust Valley and Port Washington/Sands Point). Insignia
Douglas Elliman has more than 900 brokers, supported by 130 corporate employees
in 15 offices in the New York City area. Insignia Douglas Elliman's apartment
brokerage and leasing business, which has been affected by lower transaction
volume in 2001, closed transactions valued at over $1.9 billion during the first
nine months of 2001, representing a 15% decline from the same period in 2000.

     Single Family Home Brokerage and Mortgage Origination

     Through Realty One, the Company operates a full-service single-family
residential brokerage, mortgage origination and title insurance business
headquartered in Cleveland and having offices throughout northern Ohio. Realty
One's current business operation is the result of nearly 60 separate mergers and
acquisitions and constitutes the largest residential real estate brokerage firm
in Ohio and the fourteenth largest (based on unit volume) in the United States
according to Real Trends "Big Brokers Report" published in May 2001. Realty One
employs approximately 1,500 sales associates and 600 corporate and support staff
located in 46 offices throughout northern Ohio and represents more than 100
residential builders. Realty One's operating performance improved during the
first nine months of 2001 with total transaction volume of $2.3 billion,
representing a 4% increase over the same period of 2000.

     Cooperative and Condominium Management

     Through Insignia Residential Group, the Company is the largest manager of
cooperatives, condominiums and rental apartments in the New York metropolitan
area, according to a survey in the February 2001 issue of The Cooperator.
Insignia Residential Group provides full service third-party fee management for
more than 300 properties, comprising approximately 70,000 residential apartment
units, and employs over 300 people located in offices throughout the greater New
York metropolitan area. Among the notable properties currently managed by
Insignia Residential Group in New York City are the Worldwide Plaza, Fresh
Meadows, Horizon House, West Village Houses and Metropolitan Life Insurance
Company's Peter Cooper Village/Stuyvesant Town Complex. Manhattan is the largest
market for Insignia Residential Group, although it does maintain a presence in
each of the other four boroughs of New York City as well as Long Island,
Westchester County and Northern New Jersey. In addition to property management,
Insignia Residential Group also offers mortgage brokerage services, including
resale and financing arrangements for cooperative and condominium corporations
through third-party financial institutions. Insignia Residential Group's
residential management and mortgage brokerage business generated $19.7 million
in service revenues during the first nine months of 2001.




                                       10
<PAGE>


 Internet Initiatives

     At September 30, 2001, Insignia held remaining investments totaling
approximately $5.3 million in third-party Internet-related businesses, including
$3.3 million invested in 2001 in ventures sponsored by Octane, the industry
consortium comprised of Insignia, CB Richard Ellis, Jones Lang LaSalle and
Trammel Crow. During the first nine months of 2001, the Company recorded pre-tax
impairment write-offs totaling $8.9 million of investments in thirteen
third-party Internet-based businesses. The Company has now written off the
majority of its Internet-based investments made during 1999 and 2000. While the
Company currently maintains investments in seven Internet-based businesses which
continue to operate, their future performance is highly dependent upon the
ability to raise incremental capital to fund the on-going development of their
business plans. If these businesses are unsuccessful in raising the necessary
capital, Insignia could incur further losses from impairment write-offs. The
Company continues to monitor carefully the performance of all remaining Internet
investments and has ceased making material investments in new third-party
Internet-oriented initiatives other than those developed or sponsored by Octane.

     During the first nine months of 2000, Insignia incurred pretax operating
losses of $15.2 million (before depreciation and minority interests) from
internal Internet initiatives, including consolidated losses of $9.3 million in
EdificeRex.com, Inc. ("EdificeRex"). In addition, the Company recorded $2.3
million of pretax impairment write-offs during the third quarter of 2000. The
above-mentioned EdificeRex losses exceeded the Company's investment by
approximately $3.1 million. EdificeRex, launched in February 2000, represented
Insignia's first internally developed Internet-based business and was
de-consolidated, beginning with the third quarter of 2000, due to a
restructuring which reduced the Company's voting interest to 47%. The
restructuring did not affect Insignia's ownership in EdificeRex, as the Company
continues to hold an economic interest of approximately 50%. The $3.1 million
excess loss is carried as a deferred credit on the Company's balance sheet until
Insignia disposes of its interest in EdificeRex. The Company has no obligation
or intention to provide additional funding to EdificeRex, which disposed of all
of its operating divisions in 2001. All other internal Internet-based operations
were terminated at December 31, 2000.

2.   Acquisitions

     Insignia continues to pursue an acquisition strategy that focuses on
expansion both domestically and internationally. Insignia has acquired the
following real estate services businesses in 2001:

     Baker Commercial

     In October 2001, Insignia acquired Baker Commercial Realty, Inc. ("Baker"),
a leading provider of commercial real estate services in the greater Dallas
area. Baker provides tenant representation, land and investment property sales,
and strategic real estate planning. The Baker acquisition will augment
Insignia's existing regional tenant representation and investment sales
capabilities in the greater Dallas area. The base purchase price was
approximately $2 million and was paid in cash. Additional purchase consideration
of up to $1.5 million, payable over three years, is contingent on the future
performance of the Dallas operations.

     Brooke International

     In April 2001, Insignia further expanded its Asian presence through the
acquisition of Brooke International's operation in India. The purchase price for
the Indian operation was approximately $700,000, all of which was paid in cash.
The Indian purchase follows the December 2000 acquisition of Hong Kong based
Brooke International and its offices in China and Thailand. Brooke International
is a commercial real estate company specializing in corporate and investment
services.

    Inova

    In March 2001, Insignia acquired Inova, a commercial real estate service
company headquartered in Mexico City. Inova provides acquisition advisory
services and due diligence, project coordination and supervision, real estate
valuations, tenant representation, asset management and strategic advisory
services. Inova offers Insignia an operating platform, with quality real estate
professionals, for the expansion of services in Latin America. The purchase
price was approximately $550,000 and was paid in cash.



                                       11
<PAGE>

3.   Other Events

     In August 2001, Insignia announced its intention to acquire Groupe Bourdais
("Bourdais"), headquartered in Paris, France, with closing expected in late
fourth quarter. Founded in 1954, Bourdais is one of France's premier commercial
real estate services companies with operations in eight offices, including five
in Greater Paris (Ile-de-France region) and wholly owned regional offices in
Lyon, Aix-en-Provence and Marseille.

4.   Change in Accounting Principle

     At December 31, 2000, the Company changed its method of accounting for
revenue recognition for leasing commissions in compliance with Staff Accounting
Bulletin 101 ("SAB 101"), Revenue Recognition in Financial Statements, effective
as of January 1, 2000. Prior to the accounting change, the Company generally
recognized leasing commissions upon execution of the underlying lease, unless
significant contingencies existed. Under the new accounting method, adopted
retroactive to January 1, 2000, the Company's leasing commissions that are
payable upon certain events such as tenant occupancy or payment of rent are
recognized upon the occurrence of such events.

     Operating results for the three and nine month periods of 2001 and 2000 are
presented herein in compliance with the requirements of this accounting change.
The restatement of financial results for 2000 lowered net earnings (before the
cumulative effect of the accounting change) by $3.2 million and $7.2 million,
respectively, for the three and nine month periods ended September 30, 2000. The
previously reported results for these 2000 periods included net income of $27
million ($1.11 per share) for the third quarter of 2000 and net income of $25.5
million ($1.05 per share) for the first nine months of 2000. The cumulative
effect of the accounting change on prior years resulted in a further reduction
to income of $30.4 million (net of applicable taxes of $23.3 million), which is
included in net earnings for the nine months ended September 30, 2000.

     The Company recognized revenue of $1.5 million and $14.6 million,
respectively, for the three and nine month periods ended September 30, 2001 that
was included in the $30.4 million cumulative effect adjustment at January 1,
2000. The effect on revenue was to increase earnings by approximately $400,000
and $3.4 million (net of applicable taxes), respectively, during the third
quarter and nine months of 2001. While this accounting change affects the timing
of recognition of leasing revenues (and corresponding commission expense), it
does not impact the Company's cash flow from operations.

5.   Credit Agreement

     On May 8, 2001, Insignia entered into a new, three-year $230 million
revolving credit facility, representing a $45 million increase over the prior
$185 million facility. The revolving credit facility was arranged by First Union
Securities, Lehman Brothers and Bank of America and involves a syndicate of ten
national and international financial institutions. The credit facility will be
used for working capital and acquisition needs. The Company had borrowings of
$134 million on the facility and outstanding letters of credit of $12.3 million
at September 30, 2001.

6.   Interim Financial Information

     The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with accounting principles generally accepted in the
United States for interim financial information and with the instructions to
Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all
of the information and footnotes required by accounting principles generally
accepted in the United States for complete financial statements. In the opinion
of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the three and nine month periods ended September 30, 2001 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 2001. For further information, refer to the consolidated financial
statements and footnotes thereto included in the Company's Annual Report on Form
10-K for the year ended December 31, 2000.



                                       12
<PAGE>

7.   Seasonality

     Seasonal factors affecting the Company are disclosed in Item 2 of this Form
10-Q, "Management's Discussion and Analysis of Financial Condition and Results
of Operations" under the caption "Nature of Operations."

8.   Recent Accounting Pronouncements

     In June 2001, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards ("SFAS") No. 141, Business Combinations, and No.
142, Goodwill and Other Intangible Assets, effective for fiscal years beginning
after December 15, 2001. Under the new rules, goodwill and other intangible
assets deemed to have indefinite lives will no longer be amortized but will be
subject to annual impairment tests. Other intangible assets will continue to be
amortized over their estimated useful lives.

     The Company has adopted SFAS No. 141 for all business combinations
completed after July 1, 2001 and will fully implement SFAS No. 141 and SFAS No.
142 beginning in the first quarter of 2002. Initial impairment tests of goodwill
and other intangible assets with indefinite lives required by the Statements
will be completed, with any measured impairment recorded through earnings as a
cumulative effect of a change in accounting principal, during the first quarter
of 2002. The Company's current policy for measuring goodwill impairment is based
on an undiscounted cash flow basis and that method does not indicate any
impairment. Amortization of goodwill for the three and nine months of 2001 was
$5.1 million and $14.6 million, respectively. Elimination of this amortization
would have improved diluted earnings per share for these 2001 periods by $0.23
and $0.67, respectively, before applicable tax effects. Under the provisions of
SFAS No. 142, it is possible that amounts currently carried as goodwill or other
identified intangibles could be re-characterized and reclassified upon
implementation of the Statement in 2002. Insignia does not expect to conclude an
analysis of such reclassifications before the end of 2001. Accordingly, the
potential impact of SFAS No. 142 on net income is uncertain.

     In October 2001, the Financial Accounting Standards Board issued SFAS No.
144, Accounting for the Impairment or Disposal of Long-Lived Assets. SFAS No.
144 provides accounting guidance for financial accounting and reporting for the
impairment or disposal of long-lived assets. SFAS No. 144 supersedes SFAS No.
121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of". It also supersedes the accounting and reporting of
APB Opinion No. 50 "Reporting the Results of Operations - Reporting the Effects
of Disposal of a Segment of a Business, and Extraordinary, Unusual and
Infrequently Occurring Events and Transactions" related to the disposal of a
segment of a business. SFAS No. 144 is effective for fiscal years beginning
after December 15, 2001. Management does not anticipate that its adoption will
have a material effect on the financial position or results of operations of the
Company.



                                       13
<PAGE>


9.   Earnings Per Share

     The following table sets forth the computation of the numerator and
denominator used to compute, basic and diluted earnings (loss) per share for the
periods indicated. The potential dilutive shares from the conversion of
preferred stock and the exercise of options, warrants and unvested restricted
stock is not assumed for the three and nine month periods of 2001 because the
inclusion of such shares would be antidilutive.

<TABLE>
<CAPTION>
                                                                       THREE MONTHS ENDED           NINE MONTHS ENDED
                                                                          SEPTEMBER 30                 SEPTEMBER 30
                                                                          ------------                 ------------
                                                                      2001           2000           2001           2000
                                                                      ----           ----           ----           ----
                                                                                        (In thousands)
<S>                                                                <C>            <C>             <C>           <C>
NUMERATOR:
Numerator for basic earnings per share - income available to
  common stockholders (before cumulative effect)                    $ (4,720)      $ 23,540       $ (9,199)      $ 17,626
Effect of dilutive securities:
  Preferred stock dividends                                               --            250             --            640
                                                                   -----------    -----------    -----------    -----------
Numerator for diluted earnings per share - income available
to common stockholders after assumed conversions
  (before cumulative effect)                                        $ (4,720)      $ 23,790       $ (9,199)      $ 18,266
                                                                   ===========    ===========    ===========    ===========
DENOMINATOR:
Denominator for basic earnings per share - weighted
  average common shares                                               22,214         21,338         21,932         21,095
Effect of dilutive securities:
  Stock options, warrants and unvested restricted stock                   --          1,193             --          1,472
  Convertible preferred stock                                             --          1,786             --          1,786
                                                                   -----------    -----------    -----------    -----------
Denominator for diluted earnings per share - weighted
  average common shares and assumed conversions                       22,214         24,317         21,932         24,353
                                                                   ===========    ===========    ===========    ===========
</TABLE>


10.  Comprehensive Income (Loss)

     Comprehensive loss for the nine month periods ended September 30, 2001
totaled approximately $8.9 million and was comprised of a $8.4 million net loss
and other comprehensive losses of $497,000. The following tables set forth the
components of accumulated other comprehensive income (loss) for the periods
indicated:

<TABLE>
<CAPTION>
                                                             FOREIGN           UNREALIZED        ACCUMULATED OTHER
                                                            CURRENCY             GAINS             COMPREHENSIVE
NINE MONTHS ENDED - SEPTEMBER 30, 2001                     TRANSLATION        ON SECURITIES        INCOME (LOSS)
                                                        ------------------------------------------------------------
                                                                             (In thousands)
<S>                                                     <C>                 <C>                 <C>
Balance - December 31, 2000                                 $  (6,007)          $     43            $   (5,964)

Comprehensive (loss) income                                      (909)                 9                  (900)
Income tax benefit (provision)                                    407                 (4)                  403
                                                        ------------------------------------------------------------
                                                                 (502)                 5                  (497)
                                                        ------------------------------------------------------------
Ending Balance - September 30, 2001                         $  (6,509)          $     48            $   (6,461)
                                                        ============================================================
</TABLE>



                                       14
<PAGE>

<TABLE>
<CAPTION>
                                                                           UNREALIZED       ACCUMULATED OTHER
                                                     FOREIGN CURRENCY    GAINS (LOSSES)    COMPREHENSIVE INCOME
NINE MONTHS ENDED - SEPTEMBER 30,  2000                 TRANSLATION       ON SECURITIES          (LOSS)
                                                     ----------------------------------------------------------
                                                                         (In thousands)
<S>                                                  <C>                <C>                <C>
Balance - December 31, 1999                             $    (1,333)       $     1,215        $     (118)
Comprehensive loss                                          (10,850)            (1,000)          (11,850)
Reclassification Adjustment for Realized Gains                   --               (888)             (888)
Income tax benefit                                            4,487                831             5,318
                                                     ----------------------------------------------------------
                                                             (6,363)            (1,057)           (7,420)
                                                     ----------------------------------------------------------
Ending Balance - September 30, 2000                     $    (7,696)       $       158        $   (7,538)
                                                     ==========================================================
</TABLE>


11.  Industry Segment Data

     Insignia's operating activities encompass three reportable segments. These
segments include (i) commercial real estate services and principal investment
activities; (ii) residential real estate services; and (iii) Internet-based
e-commerce initiatives. The Company's reportable segments are business units
that offer similar products and services and are managed separately because of
the distinction between such services. The commercial segment provides services
including tenant representation, property and asset management, agency leasing
and brokerage, investment sales, development, consulting and other services and
is comprised of the operations of Insignia/ESG in the U.S., IRE in the U.K. and
other businesses in Europe, Asia and Latin America. The commercial segment's
principal real estate investment activities are comprised of investments in real
estate assets (through co-investment ventures with institutional clients),
principal development activities and real estate oriented funds. The residential
segment provides services including apartment brokerage and leasing,
single-family home brokerage services, property management services, mortgage
origination and other services and is comprised of the operations of Insignia
Douglas Elliman, Realty One and Insignia Residential Group. The Company's
Internet-based initiatives segment in 2000 comprised equity investments in
third-party Internet-oriented businesses and the internally developed
Internet-related businesses of EdificeRex and PowerChooser. The Company
terminated all internally developed Internet initiatives and substantially
ceased equity financing activities with third-party Internet-based businesses in
2000. The Company's unallocated administrative expenses and corporate assets,
consisting primarily of cash and property and equipment, are included in "Other"
in the segment reporting. This information should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included in Item 2 of this Form 10-Q.




                                       15
<PAGE>


The following tables summarize certain financial information by industry
segment:

<TABLE>
<CAPTION>
                                                                                   INTERNET
NINE MONTHS ENDED - SEPTEMBER 30, 2001              COMMERCIAL    RESIDENTIAL     INITIATIVES       OTHER          TOTAL
                                                -----------------------------------------------------------------------------
                                                                                (In thousands)
<S>                                             <C>              <C>            <C>               <C>           <C>
REVENUES:
   Real estate services                             $  399,415    $   170,071      $       --     $     --      $  569,486
   Property operations                                   3,189             --              --           --           3,189
                                                -----------------------------------------------------------------------------
                                                       402,604        170,071              --           --         572,675
                                                -----------------------------------------------------------------------------
COSTS AND EXPENSES:
   Real estate services                                365,535        160,873              --           --         526,408
   Property operations                                   2,376             --              --           --           2,376
   Administrative                                           --             --              --        8,781           8,781
   Indemnity settlement                                     --          1,500              --           --           1,500
   Depreciation                                          9,094          4,820              --           57          13,971
   Property depreciation                                   810             --              --           --             810
   Amortization of intangibles                          15,452          4,568              --           --          20,020
                                                -----------------------------------------------------------------------------
                                                       393,267        171,761              --        8,838         573,866
                                                -----------------------------------------------------------------------------
   Operating income (loss)                               9,337         (1,690)             --       (8,838)         (1,191)

OTHER INCOME AND EXPENSE:
   Provisions for loss on Internet investments                                         (8,920)                      (8,920)
   Interest and other income                             1,532          1,122              --        2,265           4,919
   Interest expense                                       (461)          (999)             --       (9,221)        (10,681)
   Foreign currency gains                                   --             --              --          356             356
   Equity earnings in real estate ventures               1,288             --              --           --           1,288
                                                -----------------------------------------------------------------------------
Income (loss) before income taxes                       11,696         (1,567)         (8,920)     (15,438)        (14,229)

   (Provision) benefit for income taxes                 (6,082)         1,017           3,126        7,719           5,780
                                                -----------------------------------------------------------------------------
Net income (loss)                                   $    5,614    $      (550)     $   (5,794)   $  (7,719)     $   (8,449)
                                                =============================================================================
Total assets                                        $  555,095    $   164,052      $    5,332    $  49,599      $  774,078
Real estate interests                                   70,390                                                      70,390
</TABLE>



                                       16
<PAGE>

<TABLE>
<CAPTION>
                                                                               INTERNET
NINE MONTHS ENDED - SEPTEMBER 30, 2000           COMMERCIAL    RESIDENTIAL    INITIATIVES       OTHER        TOTAL
                                               -----------------------------------------------------------------------
                                                                           (In thousands)
<S>                                            <C>             <C>            <C>            <C>          <C>
REVENUES
   Real estate services                          $  420,975    $  178,941      $      --      $     --    $  599,916
   Property operations                                3,453            --             --            --         3,453
                                               -----------------------------------------------------------------------
                                                    424,428       178,941             --            --       603,369
                                               -----------------------------------------------------------------------
 COSTS AND EXPENSES
   Real estate services                             372,904       164,287             --            --       537,191
   Property operations                                2,846            --             --            --         2,846
   Internet-based businesses                             --            --         15,211            --        15,211
   Administrative                                        --            --             --        11,563        11,563
   Depreciation                                       5,827         3,078          1,049            42         9,996
   Property depreciation                              1,013            --             --            --         1,013
   Amortization of intangibles                       14,790         4,520             --            --        19,310
                                               -----------------------------------------------------------------------
                                                    397,380       171,885         16,260        11,605       597,130
   Operating income (loss)                           27,048         7,056        (16,260)      (11,605)        6,239

OTHER INCOME AND EXPENSE:
   Gain on life insurance proceeds                       --            --             --        19,100        19,100
   Gain on sale of marketable securities                 --            --            888            --           888
   Provision for loss on Internet investments            --            --         (2,294)           --        (2,294)
   Interest and other income                          1,517           896             --         2,253         4,666
   Interest expense                                    (689)       (1,014)            --        (7,714)       (9,417)
   Foreign currency gains                                --            --             --         2,448         2,448
   Equity earnings in real estate ventures            2,891            --             --            --         2,891
   Minority interests                                    --            --            900            --           900
                                               -----------------------------------------------------------------------
Income (loss) before income taxes and
   cumulative effect of a change in
   accounting principle                              30,767         6,938        (16,766)        4,482        25,421

   (Provision) benefit for income taxes             (12,949)       (4,040)         4,279         5,555        (7,155)
                                               -----------------------------------------------------------------------
Income (loss) before cumulative effect of a
   change in accounting principle                    17,818         2,898        (12,487)       10,037        18,266

Cumulative effect of a change in accounting
   principle, net of applicable taxes               (30,391)          (29)            --            --       (30,420)
                                               -----------------------------------------------------------------------
Net income (loss)                                $  (12,573)   $    2,869      $ (12,487)     $ 10,037    $  (12,154)
                                               =======================================================================
Total assets                                     $  688,472    $  163,143      $  25,824      $ 50,519    $  927,958
Real estate interests                                98,792            --             --            --        98,792
</TABLE>




                                       17
<PAGE>


    Certain geographic information is as follows:

<TABLE>
<CAPTION>
                               SEPTEMBER 30, 2001              SEPTEMBER 30, 2000
                          ---------------------------------------------------------------
                                            LONG-LIVED                       LONG-LIVED
                              REVENUES        ASSETS         REVENUES          ASSETS
                          ---------------------------------------------------------------
                                                 (In thousands)
<S>                       <C>            <C>             <C>              <C>
United States                $ 488,225      $ 290,139       $ 512,236        $ 309,921
United Kingdom                  73,825        109,261          85,123           90,677
Other countries                 10,625          8,628           6,010            3,002
                          ---------------------------------------------------------------
                             $ 572,675      $ 408,028       $ 603,369        $ 403,600
                          ===============================================================
</TABLE>

     Long-lived assets are comprised of property and equipment, property
management contracts and costs in excess of net assets of acquired businesses.

12.  Material Contingencies

     Antitrust Litigation

     In 1994, Re/Max International and various franchisees filed suit in federal
court in Ohio against Realty One, alleging claims under the federal antitrust
laws and related state law claims. Re/Max International alleged in its complaint
that Realty One conspired with Smythe, Cramer Company to institute a series of
differential commission splits intended to harm Re/Max International and its
franchisees in the northeast Ohio residential real estate brokerage market.
Re/Max International claimed actual damages of $30 million. The federal
antitrust laws provide for trebling of actual damages.

     Insignia acquired Realty One in October 1997. In connection with the
acquisition, the sellers of Realty One agreed to indemnify the Company for any
loss arising from the Re/Max International litigation up to the amount of the
acquisition price of approximately $40 million. The Re/Max International case
was tried before a jury in 2000, resulting in a mistrial. The parties
subsequently settled Re/Max International's claims in July 2000, whereby Realty
One agreed to cease to impose reduced commission splits on the Re/Max
plaintiffs, subject to reinstatement in accordance with the terms of the
settlement. In September 2000, the court entered a judgment against Realty One
in the amount of approximately $6.7 million, as agreed to by the parties; in
November 2001, the Sixth Circuit affirmed the terms of that judgment. In 2000,
the sellers of Realty One funded the initial cash portion of the settlement,
totaling approximately $3.7 million, on behalf of Realty One pursuant to their
indemnification obligations to Insignia.

     In the course of defending the Re/Max suit, Insignia incurred certain legal
fees for which the sellers of Realty One had agreed to reimburse to Insignia
under the terms of the indemnification. In July 2001, Insignia reached a
settlement with the sellers of Realty One regarding the Company's indemnity
claim. The terms of the settlement required the sellers to pay $2 million to
Insignia as reimbursement for certain professional fees incurred in connection
with the Re/Max suit and this payment was collected in October 2001. The Company
incurred a one-time charge of $1.5 million in the second quarter of 2001 for
unrecovered costs stemming from the Re/Max suit. As a condition to the
settlement agreement, the sellers of Realty One agreed to fund the remaining $3
million cash portion of the Re/Max settlement on behalf of Realty One pursuant
to the indemnification to Insignia. The remaining payment is to be made by the
sellers of Realty One in semi-annual installments over the remaining four years.

     As part of the indemnity settlement, Insignia also agreed to share with the
Sellers in the costs and expenses and any potential judgment or settlement of
two similar cases brought by individual Re/Max franchises. Realty One is
vigorously defending these actions, and Insignia does not believe that the
results of these two cases will have a material adverse effect on the financial
condition, results of operations or cash flows of the Company.

     Ordinary Course of Business Claims

     Insignia and certain subsidiaries are defendants in other lawsuits arising
in the ordinary course of business. Management does not expect that the results
of any such lawsuits will have a material adverse effect on the financial
condition, results of operations or cash flows of the Company.



                                       18
<PAGE>

     Indemnification

     In 1998, the Company's former parent entered into a Merger Agreement with
Apartment Investment and Management Company ("AIMCO"), and one of AIMCO's
subsidiaries, pursuant to which the former parent was merged into AIMCO. Shortly
before the merger, the former parent distributed the stock of Insignia to its
shareholders in a Spin-Off transaction. As a requirement of the Merger
Agreement, Insignia entered into an Indemnification Agreement with AIMCO. In the
Indemnification Agreement, Insignia agreed generally to indemnify AIMCO against
all losses exceeding $9.1 million that result from: (i) breaches by the Company
or former parent of representations, warranties or covenants in the Merger
Agreement; (ii) actions taken by or on behalf of former parent prior to the
merger, and (iii) the spin-off. The Company also agreed generally to indemnify
AIMCO against all losses, without regard to any dollar value limitation, that
result from: (i) amounts AIMCO paid to employees of the former parent that were
not retained as employees of AIMCO; (ii) pre-merger obligations for goods,
services, taxes or indebtedness except for those that AIMCO agreed to assume;
and (iii) the businesses of the former parent that Insignia now owns and
operates as a result of the Spin-Off.

     Since the merger transaction in October 1998, there have been no related
claims except for an examination of the federal income tax returns of the former
parent being conducted by the Internal Revenue Service for the years ended
December 31, 1996 and 1997 and the period ended October 1, 1998. AIMCO has
notified the Company that it is seeking indemnity from Insignia for any
liability as a result of this examination. Insignia agreed to indemnify AIMCO
for taxes, penalties, interest and professional fees for which it is liable as a
result of this audit and has made payments of more than $500,000 for
professional fees incurred in connection with the audit. This examination
remains in progress and no determinations can be made at this time as to any
potential tax liability that may arise as a result of this examination.

13.  Equity

     During the nine month period ended September 30, 2001, the Company had the
following changes in stockholders' equity:

     a) Net Loss of $8,449,000 for the nine months ended September 30, 2001.

     b) Payments of $1,000,000 in Preferred Stock dividends.

     c) Issuance of 649,348 shares of Common Stock upon exercise of stock
        options and warrants at exercise prices ranging from $3.74 to $11.59 per
        share.

     d) Sale of 133,976 shares of Common Stock under the Company's Employee
        Stock Purchase Program at an average price of approximately $9.28.

     e) Issuance of 25,350 shares of Common Stock for vested restricted stock
        awards.

     f) Accrued compensation of $612,000 relating to restricted stock awards.

     g) Collections of $119,000 on notes receivable for Common Stock.

     h) Other comprehensive losses of $497,000 for the nine months ended
        September 30, 2001.



                                       19
<PAGE>

Item 2. Management's Discussion and Analysis of Financial Condition and Results
        of Operations

FINANCIAL CONDITION

     The Company's total assets declined more than $136 million, from $910.3
million at December 31, 2000 to $774.1 million at September 30, 2001. The
decline was substantially due to (i) a $74 million reduction in cash arising
principally from significant payments of prior year incentives in early 2001;
(ii) a $47 million decline in receivables; and (iii) a $32 million decline in
real estate interests resulting from the sale of real estate properties
developed by the Company.

     Liabilities decreased more than $130 million, from $501.5 million at
December 31, 2000 to $371.1 million at September 30, 2001. This decrease
reflects the aforementioned payment of year 2000 accrued incentives and a $28
million reduction in commissions payable, consistent with the decline in
receivables. Also contributing to the decline in liabilities was the retirement
of $33 million of real estate mortgage notes payable upon the sale of real
estate properties developed by Insignia. Stockholders' equity decreased almost
$6 million to approximately $403 million at September 30, 2001, primarily as a
result of a $8.4 million net loss for the nine months of 2001. Also affecting
stockholders equity were stock issuance's of $4 million and the payment of $1
million in preferred stock dividends during 2001.

RESULTS OF OPERATIONS

     The Company's operating performance for 2001 has been characterized by an
exceptionally strong first quarter, followed by second and third quarters that
suffered from the effects of a softening U.S. economy and the tragic events of
September 11, 2001. In particular, the U.S. commercial real estate operations
have been adversely affected in 2001 by a "wait and see" attitude adopted by
many businesses in light of the growing economic uncertainty, which has been
exacerbated by the incidents on September 11th. No operating unit has been
immune to the effects of the events on September 11th as business activity in
all service areas and across all geographic boundaries was stalled, delayed or
in some cases cancelled following September 11th. As a result, the Company's
results for the first nine months of 2001 lagged behind the exceptionally robust
results achieved during the same period of 2000. For the first nine months of
2001, service revenues declined to $569.5 million from $599.9 million for the
same period of 2000. Reported Net EBITDA was more significantly affected,
declining 38% for the nine months of 2001 to $32.2 million, down from $51.8
million for the same period of 2000.

     The Company's operating results for the third quarter of 2001 were
predictably poor, reflecting the combined effects of the above mentioned events
of September and the weakening U.S. and global economies. For the third quarter
of 2001, service revenues declined to $176.8 million from $202.3 million for the
same period in 2000. Net EBITDA for the third quarter of 2001 totaled a modest
$6.3 million, compared to $19.9 million for the third quarter of 2000.
Transaction levels in 2001 for U.S. commercial leasing and New York residential
sales and rentals continue to be adversely affected by these uncontrollable
events. Further, the Company's European operations began to feel the effects of
the geographically expanding economic slowdown during the third quarter of 2001
as EBITDA production tapered off from the red hot transaction levels experienced
in 2000, particularly in the U.K.

    Net EBITDA and pre-tax earnings for the nine months of 2001 were lowered by
the second quarter $1.5 million one-time charge for unrecovered costs stemming
from an indemnity claim against the sellers from whom Insignia acquired Realty
One. In July 2001, Insignia reached a settlement with the sellers of Realty One,
who had agreed to indemnify the Company from a lawsuit pre-dating Insignia's
acquisition of Realty One in 1997. Conversely, pre-tax earnings for the third
quarter and nine months of 2000 were materially enhanced by a one-time $19.1
million gain from proceeds due under a key-man life insurance policy.

     Earnings for the third quarter and nine months of 2001 included pretax
impairment write-offs of $1.8 million and $8.9 million, respectively, of
remaining third-party Internet-based business investments, representing capital
committed by Insignia predominantly in 1999 and 2000. Results for 2000 included
pretax Internet operating losses and write-offs totaling $3.6 million in the
third quarter and $16.8 million for the nine months (net of minority interests
and a gain from the sale of an Internet investment).



                                       20
<PAGE>


     The Company posted a net loss of $4.5 million ($0.21 per diluted share) for
the third quarter of 2001, compared with net income of $23.8 million ($0.98 per
diluted share), for the same period of 2000. For the nine months of 2001, the
Company incurred a net loss of $8.4 million ($.042 per diluted share) compared
to net income of $18.3 million ($0.75 per diluted share) for the third quarter
of 2000 (before the cumulative effect of accounting change).

     The $30.4 million cumulative effect of the SAB 101 accounting change at
January 1, 2000 resulted in a reported net loss of $12.2 million ($0.50 per
diluted share) for the first nine months of 2000. It is important to note that
the lowering effect of SAB 101 adoption on 2000 net earnings solely represented
a modification in the timing of recognition for leasing revenues and had no
impact on cash flow from operations.

        Despite the poor financial performance of the second and third quarters
of 2001 and the challenging and unpredictable times facing the real estate
industry, the Company remains optimistic in its ability to deliver solid results
for the 2001 year as a whole. The fourth quarter should represent the Company's
strongest quarter of 2001, although it cannot be expected to fully mitigate the
soft performance of the second and third quarters. The Company is already
experiencing a resurgence in transactional activity in the early stages of the
fourth quarter, particularly in New York commercial property services. This
expected improvement stems in part from the completion of transactions delayed
by general business disruption in September and relocation of displaced
companies that occupied space in the World Trade Center.

     It is noteworthy to add that the Company remains extremely cognizant of the
importance of expense management, particularly in trying times like these. To
this end, the Company has already implemented cost cuts, salary freezes and
hiring freezes and other cost containment programs that eliminate more than $15
million of fixed overhead on an annualized basis, including base salary
reductions of 10% for most members of senior management. Prudent cost control is
a high priority that will aid in augmenting the Company's operating performance
for the remainder of 2001 and into the next year.

     In addition to net income, Insignia uses EBITDA (defined as real estate
services revenues less direct expenses and administrative costs) and Net EBITDA
(defined as income before depreciation, amortization, income taxes and
non-recurring one-time charges) as indicators of the Company's financial
performance. As compared to net income, these measures effectively eliminate the
impact of non-cash charges for depreciation, amortization of intangibles and
other non-recurring charges. Neither EBITDA nor Net EBITDA, as disclosed above,
should be construed to represent cash provided by operations pursuant to
accounting principles generally accepted in the United States ("GAAP"), as
neither is defined by GAAP. Insignia's usage of these terms may differ from
other companies' usage of the same or similar terms. The Company's results of
operations are more fully discussed below.




                                       21
<PAGE>


     The following table sets forth financial data derived from the Company's
condensed consolidated statements of operations for the three and nine months
ended September 30, 2001 and 2000, respectively.

<TABLE>
<CAPTION>
                                                          THREE MONTHS ENDED                NINE MONTHS ENDED
                                                             SEPTEMBER 30                      SEPTEMBER 30
                                                             ------------                      ------------
                                                         2001             2000             2001           2000
                                                         ----             ----             ----           ----
                                                                             (In thousands)
<S>                                                <C>               <C>               <C>            <C>
REAL ESTATE REVENUES
     United States commercial                       $     87,390      $   102,140       $  314,965     $  329,938
     International commercial                             27,588           35,953           84,450         91,133
     Residential                                          61,806           64,250          170,071        178,845
                                                   ----------------  ---------------   -------------  -------------
         Total real estate revenues                      176,784          202,343          569,486        599,916
                                                   ----------------  ---------------   -------------  -------------
COSTS AND EXPENSES
     Real estate services                                167,954          179,032          526,408        537,191
     Indemnity settlement                                     --               --            1,500             --
     Administrative                                        2,399            3,757            8,781         11,563
                                                   ----------------  ---------------   -------------  -------------
EBITDA - REAL ESTATE SERVICES (1)                          6,431           19,554           32,797         51,162

     Real estate FFO(2)                                    1,807              998            4,830          2,911
     Interest and other income                             1,380            1,854            4,919          4,666
     Foreign currency gains                                   17            1,167              356          2,448
     Interest expense                                     (3,385)          (3,629)         (10,681)        (9,417)
                                                   ----------------  ---------------   -------------  -------------
NET EBITDA(1)                                              6,250           19,944           32,221         51,770
     Applicable income tax (provision) benefit             3,377           (4,021)           2,904        (10,531)
                                                   ----------------  ---------------   -------------  -------------
AFTER TAX NET EBITDA                                       9,627           15,923           35,125         41,239

     Gains on sale of real estate                            161              391              625          3,203
     Tax on real estate                                      (64)            (156)            (250)        (1,281)
     Depreciation - FF&E                                  (4,875)          (3,193)         (13,971)        (8,947)
     Amortization of intangibles                          (6,342)          (6,533)         (20,020)       (19,310)
     Depreciation - real estate                           (1,821)          (1,299)          (4,164)        (3,629)
                                                   ----------------  ---------------   -------------  -------------
INCOME (LOSS) FROM REAL ESTATE OPERATIONS                 (3,314)           5,133           (2,655)        11,275

   Life Insurance Proceeds                                    --           19,100               --         19,100
   Internet-based businesses                                  --           (1,047)              --        (13,423)
   Provision for loss of Internet investments             (1,779)          (2,294)          (8,920)        (2,294)
   Internet depreciation                                      --             (212)              --         (1,049)
   Benefit for income taxes                                  623            3,110            3,126          4,657
                                                   ----------------  ---------------   -------------  -------------
                                                          (1,156)          18,657           (5,794)         6,991
                                                   ----------------  ---------------   -------------  -------------
NET INCOME (LOSS) (3)                               $     (4,470)     $    23,790       $   (8,449)    $   18,266
                                                   ================  ===============   =============  =============
</TABLE>

(1) EBITDA and Net EBITDA, as disclosed above, should not be construed to
represent cash provided by operations determined pursuant to GAAP. These
measures are not defined by GAAP and Insignia's usage of these terms may differ
from other companies' usage of the same or similar terms. As compared to net
income, the EBITDA and Net EBITDA measures effectively eliminate the impact of
non-cash charges for depreciation, amortization of intangible assets and other
non-recurring charges. Management believes that the presentation of these
supplemental measures enhance a reader's understanding of the Company's
operating performance as they provide a measure of generated cash.




                                       22
<PAGE>

(2) Funds From Operations ("FFO") is defined as income or loss from real estate
operations before depreciation, gains or losses on sales of property and
provisions for impairment. This measure is not defined by GAAP and Insignia's
usage of this term may differ from other companies' usage of the same or similar
terms. Management uses this supplemental measure in the evaluation of principal
real estate investment activities and believes that it provides a measure of
generated cash flows for the Company's real estate property operations.

(3) Represents loss before cumulative effect of the accounting change on prior
years.

Commercial Real Estate Services

     Insignia's commercial real estate service operations include Insignia/ESG
in the United States, IRE in the United Kingdom and other businesses in Germany,
Italy, Belgium, the Netherlands, Spain, Asia and Latin America. These businesses
collectively produced results for the third quarter and nine months of 2001
which was well below the Company's expectations and the results achieved for the
same periods of 2000. Activity levels, particularly in third quarter, lagged
behind the robust levels in 2000 as both the U.S. and Europe began to feel the
full effects of economic slowdown. The poor performance in the third quarter
2001 was magnified by the disruption of the normal business pattern following
the tragic attacks on the U.S. in September. The Company's third quarter is
typically characterized by the development of business during the months of July
and August followed by transaction closings generally after Labor Day.
Predictably, the vast majority of scheduled transaction closings for September
were lost, particularly in New York commercial services. Accordingly, the
commercial businesses collectively produced service revenues of $115 million and
EBITDA of $4 million for the third quarter of 2001, versus $138.1 million of
revenues and $16.9 million of EBITDA for same quarter of 2000. For the nine
months of 2001, commercial services generated $399.4 million of service revenues
and $33.9 million of EBITDA, down slightly from $421.1 million and $48.1
million, respectively, for the same period of 2000.

     In the U.S., commercial services of Insignia/ESG generated service revenues
of $87.4 million and EBITDA of $2.9 million, representing a revenue decline of
14% from $102.1 million and an EBITDA decline of 66% from $9.4 million, compared
to the third quarter of 2000. For the nine months of 2001, U.S. commercial
services produced service revenues of $315 million, a 5% decline from $329.9
million in 2000, and EBITDA of $27.2 million, down 22% from $34.6 million in
2000. Again, the performance of U.S. commercial services for the third quarter
and nine months of 2001 has been hampered by general economic uncertainty and
the deferral of major transactions originally slated to close in September.
While most of those transactions were not related to the terrorist incidents,
they were caught in the general business disruption of post September 11th.

     Results for European operations declined in the third quarter of 2001,
compared to 2000, as the economic slowdown in the U.S. expanded geographically
and began to impact the U.K. and mainland European markets. European revenues
and EBITDA for the third quarter of 2001 dropped to $26.5 million and $2.4
million, respectively, compared to $35.9 million and $7.5 million. For the nine
months of 2001, European operations generated $81.9 million of service revenues
and $9.5 million of EBITDA, compared to $91.1 million and $13.5 million for the
same period of 2000. The Company's U.K. operation continued to generate the
substantial majority of Europe's production, with generated service revenues and
EBITDA of $73.8 million and $2.3 million, respectively. For the comparable third
quarter of 2000, the U.K. business produced service revenues and EBITDA of $31.7
million and $6 million, respectively. For the nine months of 2001, U.K.
operations produced service revenues of $73.8 million and EBITDA of $8.6
million, compared to revenues of $85.1 million and EBITDA of $12.9 million for
the same period of 2000. Although market activity has fallen, as anticipated,
below the exceptionally high levels of 2000, the U.K. and mainland European
businesses continued to outperform expectations for the nine months of 2001.

     The Company's start-up commercial operations in Asia and Latin America,
launched in 2000 and early 2001, respectively, incurred combined EBITDA losses
in 2001 of $1.2 million for the third quarter and $2.8 million for the nine
months. These losses remain in line with the Company's expectations for their
initial start-up periods. The Company anticipates positive contributions from
these operations beginning in 2002.

Real Estate Principal Investment Activities

     The Company's real estate principal investment operations continue to
represent a bright spot for the Company, as overall performance for the third
quarter and nine months of 2001 exceeds the levels experienced during the same
periods of 2000. Principal investment operations reported marked improvement in
Funds From Operations ("FFO")


                                       23
<PAGE>

for the third quarter and nine months of 2001, compared to 2000. FFO rose 81% to
$1.8 million for the third quarter of 2001 and 66% to $4.8 million for the nine
months of 2001, demonstrating continued strong performance of the Company's
co-investment property portfolio, despite the deepening economic slowdown in the
U.S., and a decrease in the number of property sales (compared to 2000). FFO is
defined as income or loss from real estate operations before depreciation, gains
or losses on property sales and provisions for impairment. This measure is not
defined by GAAP and the Company's usage of this term may differ from other
companies' usage of the same or similar terms. The Company believes this
supplemental disclosure provides a measure of cash generated by property
operations.

     The Company's co-investment and development assets generated equity
earnings of $234,000 and $1.3 million for the third quarter and nine months of
2001, respectively. For the same periods of 2000, these operations produced
equity earnings of $250,000 and $2.9 million, primarily as a result of gains
realized from sales of co-investment properties. For the nine months of 2001,
pretax gains from property sales totaled a modest $625,000, compared to pretax
gains totaling $3.2 million for the nine months of 2000. Sales of investment
assets are sporadic and the timing of such sales is not easily predicted.

Residential Real Estate Services

     The Company's residential real estate services are provided through
Insignia Douglas Elliman, Realty One and Insignia Residential Group. Results
from residential real estate services in 2001 remain off from 2000's
exceptionally strong pace, particularly in the New York co-op and condo market.
Total service revenues declined 4% to $61.8 million for the third quarter of
2001, compared with $64.3 million for the same period of 2000. Residential
EBITDA declined to $4.8 million for the third quarter of 2001, compared with
$6.4 million for the third quarter of 2000. For the nine months of 2001,
residential revenues totaled $170.1 million, compared with $178.9 million in the
same period of 2000, while EBITDA was $9.2 million versus $14.6 million a year
earlier. The 2001 residential performance has been characterized by a modest
rebound in both Realty One's single-family brokerage and mortgage origination
business and Insignia Residential Group's coop management business and material
erosion in sales activity levels at Insignia Douglas Elliman.

     Insignia Douglas Elliman generated service revenues and EBITDA of $24.9
million and $2 million, respectively, for the third quarter of 2001, down from
$29.3 million and $3.2 million, respectively, for the third quarter of 2000.
Overall business activity lagged behind last year's strong third quarter, with
gross transaction volume falling 10% to $677 million in the third quarter of
2001, down from $756 million for the same period of 2000. The average sales
price declined slightly in the third quarter of 2001 to approximately $839,000
from $862,000 in 2000, reflecting the softer sales market. For the nine months
of 2001, Insignia Douglas Elliman produced service revenues of $72.6 million and
EBITDA of $4.9 million, respectively, representing a revenue decline of 14% from
$84.6 million and an EBITDA decline of 55% from $11 million in 2000. Activity
levels for the nine months of 2001 reflected a 15% decline in gross transaction
volume to $1.9 billion, compared to 2000. In contrast, average sales prices
increased 1% to $833,000 for the nine months of 2001 from $822,000 in 2000.

     Realty One's operating performance rebounded during the first nine months
of 2001, compared to the sub-par 2000, fueled by declining interest rates which
boosted home sales and mortgage origination activity. For the nine months of
2001, total transaction volume increased 4% to $2.3 billion and the average
sales price increased 3% to $160,000, compared to 2000. Lower interest rates
continued to fuel heavy re-financing activity in the Company's mortgage finance
unit, First Ohio Mortgage Corporation. As a result, total mortgage origination
volume grew 25% to $312 million for the nine months of 2001, compared to 2000.
For the nine months of 2001, Realty One reported improved results over 2000 with
service revenues up 5% to $77.8 million and EBITDA up 10% to $3.5 million. For
the third quarter of 2001, total transaction volume increased 4% to $893 million
and the average sales price increased 1% to $161,000, compared to 2000. Total
mortgage origination volume grew 26% to $106.3 million for the third quarter of
2001, compared to 2000. As a result, Realty One revenues increased 7% to $30.5
million in the third quarter of 2001, compared to 2000.

     Insignia Residential Group contributed positively to residential profits
with EBITDA of $138,000 for the third quarter and $775,000 for the nine months
of 2001, representing improvement of 13% and 79%, respectively, over 2000. These
improvements in EBITDA were achieved in part through the implementation of a
reorganization plan that called for the termination of non-profitable property
management engagements and prudent expense reductions. Another noteworthy
contributing factor to the improved performance was Insignia Residential Group's
second quarter 2001 engagement as property manager and leasing agent for Peter
Cooper Village and Stuyvesant Town, a 12,000 unit apartment portfolio in
Manhattan.



                                       24
<PAGE>

Internet

     Internet losses continued to adversely affect net income in the third
quarter and nine months of 2001 despite the termination of all internal
internet-based initiatives and the curtailing of all material third-party
investment in Internet companies in 2000. The Company's results for the third
quarter of 2001 included pre-tax write-downs of $1.8 million in seven of the
Company's remaining third-party Internet-based business investments. For the
nine months of 2001, Internet write-downs in thirteen investments amounted to an
aggregate $8.9 million.

     For 2000, net pre-tax Internet losses and impairment write-offs totaled
$3.6 million and $16.8 million (including applicable depreciation) for the third
quarter and nine months, respectively. These losses included $9.3 million
attributable to EdificeRex operations for the first half of 2000 and operating
losses of $2.0 million and $5.9 for the third quarter and nine months of 2000
attributable to the development of the PowerChooser Internet exchange and other
internal Internet initiatives. In addition, the third quarter and nine months of
2000 included a $2.3 million write-off of an investment in a private
Internet-based business and a one-time gain of $888,000 on the sale of the
Company's equity investment in Homestore.com. EdificeRex represented the
Company's first internally developed Internet-based business, which was
de-consolidated in the third quarter of 2000 due to a restructuring that reduced
the Company's voting interest below 50%. The PowerChooser development and all
other internal Internet initiatives were abandoned in 2000.

Other Items Affecting Net Income

     Administrative expenses declined 36% to $2.4 million for the third quarter
of 2001 and 24% to $8.8 million for the nine months of 2001, as compared to the
same periods of 2000. These administrative expense reductions are primarily
attributable to sharply lower incentive compensation compared to 2000 and
prudent expense management. As an example, 10% reductions in annual base
compensation for senior management is being applied over the second half of
2001.

     Interest and other income declined 26% to $1.4 million and increased 5% to
$4.9 million, respectively, for the third quarter and nine months of 2001, as
compared to 2000. Interest income for the third quarter of 2001 was affected by
lower interest rates and modest cash levels, as compared to 2000. Conversely,
interest earnings for the nine months of 2001 was enhanced by higher average
cash holdings in 2001, particularly during the first quarter prior to payment of
incentives for the 2000 year.

     Interest expense declined 7% to $3.4 million in the third quarter of 2001
as a result of material declines in borrowing rates. For the nine months of
2001, interest expense increased 13% to $10.7 million reflecting higher average
borrowings compared to 2000.

     Depreciation expense (excluding property depreciation) rose 43% to $4.9
million for the third quarter of 2001 and 40% to $14 million for the nine months
of 2001, compared to 2000. The increases are attributed to more than $60 million
in capital improvements over the past two years for new information technology
platforms and leasehold improvements in connection with the upgrade and
relocation of offices in key U.S. markets.

     Amortization of intangibles decreased 3% to $6.3 million for the third
quarter of 2001 due to certain intangibles becoming fully amortized during 2001.
Conversely, amortization of intangibles increased 4% to $20 million for the nine
months of 2001 primarily as a result of payments in 2001 for achieved contingent
earnouts and acquisitions substantially comprised of purchased intangibles.

     Income taxes for the three and nine months of 2001 reflected tax benefits
of $3.9 million and $5.8 million, respectively, due to pre-tax operating losses
incurred in those periods. Conversely, the same periods of 2000 included income
tax expense due to the reported levels of pre-tax income; however, the level of
income tax is lowered by the non-taxable nature of the $19.1 million gain from
life insurance proceeds.

LIQUIDITY AND CAPITAL RESOURCES

     Insignia's liquidity and capital resources consist of its unrestricted cash
on hand, available credit under its credit facilities and cash provided by
operations and investment activities. The Company utilizes cash holdings and
available credit for general corporate purposes, expansion of the service
platform through acquisitions and office expansion and to fund ongoing principal
investment initiatives.


                                       25
<PAGE>

     Unrestricted cash at September 30, 2001 totaled $50.1 million, representing
a significant decline from $124.5 million at December 31, 2000. Unrestricted
cash at December 31, 2000 included approximately $75 million of funds used in
early 2001 for payment of 2000 incentive compensation and more than $22 million
utilized to secure loan notes issued in satisfaction of the remaining purchase
consideration for the U.K. businesses. The Company's total debt at September 30,
2001 and December 31, 2000 was comprised of the following:

<TABLE>
<CAPTION>
                                            SEPTEMBER 30,       DECEMBER 31,
                                                2001                2000
                                                ----                ----
                                                     (In thousands)
<S>                                         <C>                 <C>
Credit facility borrowings                    $ 134,000           $ 122,350
Cash-secured acquisition indebtedness            25,436               6,219
Other debt of subsidiaries                        8,235               7,213
                                            ---------------------------------
     Total notes payable                        167,671             135,782

Mortgage warehouse line of credit                12,527               9,502
Real estate mortgage notes payable               15,796              48,369
                                            ---------------------------------
     TOTAL DEBT                               $ 195,994           $ 193,653
                                            =================================
</TABLE>

     The real estate mortgages, mortgage warehouse line and cash-secured
acquisition indebtedness are all self-liquidating from the related assets. Other
debt of $142 million at September 30, 2001 (together with approximately $12.3
million in letters of credit supporting real estate investments) represents the
outstanding obligations under facilities aggregating approximately $245 million.
In May 2001, Insignia completed a renewal and expansion of its revolving credit
facility, resulting in a new three-year $230 million credit facility. With the
expanded facility, the Company had nearly $100 million in unused borrowing
capacity available for acquisitions and general corporate purposes. The Company
remains comfortably above all required covenant levels despite the effects of
the further weakening U.S. and European economies during 2001.

     Cash used in operating activities totaled $45.9 million for the first nine
months of 2001, compared to positive cash flows totaling $14.6 million for the
same period of 2000. Cash from operations in 2001 is negative as a result of
payment in the first quarter of 2001 of incentive compensation earned in 2000.
Cash flows from investing and financing activities for the nine months of 2001
were characterized by lower levels of real estate investment and capital
expenditures (compared to 2000), coupled with $40 million in proceeds from the
sale of two real estate properties developed by Insignia and the corresponding
payoff of $33 million of real estate debt financing their development.

     Capital expenditures totaled $11.5 million for the nine months of 2001 and
are expected to exceed $15 million for the 2001 year. The Company believes that
its cash on hand, available credit and anticipated cash flows from operations
and investment activities are sufficient for its short term and long term
operating and capital requirements.

RECENT ACCOUNTING PRONOUNCEMENTS

     In June 2001, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards ("SFAS") No. 141, Business Combinations, and No.
142, Goodwill and Other Intangible Assets, effective for fiscal years beginning
after December 15, 2001. Under the new rules, goodwill and other intangible
assets deemed to have indefinite lives will no longer be amortized but will be
subject to annual impairment tests. Other intangible assets will continue to be
amortized over their estimated useful lives.

     The Company has adopted SFAS No. 141 for all business combinations
completed after July 1, 2001 and will fully implement SFAS No. 141 and SFAS No.
142 beginning in the first quarter of 2002. Initial impairment tests of goodwill
and other intangible assets with indefinite lives required by the Statements
will be completed, with any measured impairment recorded through earnings as a
cumulative effect of a change in accounting principal, during the first quarter
of 2002. The Company's current policy for measuring goodwill impairment is based
on an undiscounted cash flow basis and that method does not indicate any
impairment. Amortization of goodwill for the three and nine months of 2001
totaled approximately $5.1 million and $14.6 million, respectively. Elimination
of this amortization would have improved diluted earnings per share for these
2001 periods by $0.23 and $0.67,


                                       26
<PAGE>

respectively, before applicable tax effects. Under the provisions of SFAS No.
142, it is possible that amounts currently carried as goodwill or other
identified intangibles could be re-characterized and reclassified upon
implementation of the Statement in 2002. Insignia does not expect to conclude an
analysis of such reclassifications before the end of 2001. Accordingly, the
potential impact of SFAS No. 142 on net income is uncertain.

     In October 2001, the Financial Accounting Standards Board issued SFAS No.
144, Accounting for the Impairment or Disposal of Long-Lived Assets. SFAS No.
144 provides accounting guidance for financial accounting and reporting for the
impairment or disposal of long-lived assets. SFAS No. 144 supersedes SFAS No.
121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of". It also supersedes the accounting and reporting of
APB Opinion No. 50 "Reporting the Results of Operations - Reporting the Effects
of Disposal of a Segment of a Business, and Extraordinary, Unusual and
Infrequently Occurring Events and Transactions" related to the disposal of a
segment of a business. SFAS No. 144 is effective for fiscal years beginning
after December 15, 2001. Management does not anticipate that its adoption will
have a material effect on the financial position or results of operations of the
Company.

IMPACT OF INFLATION AND CHANGING PRICES

     Inflation has not had a significant impact on the results of operations of
Insignia in recent years and is not anticipated to have a significant impact in
the foreseeable future. Insignia's exposure to market risk from changing prices
consists primarily of fluctuations in rental rates of commercial and residential
properties, market interest rates on residential mortgages and debt obligations,
real estate property values and foreign currency fluctuations affecting
operating results in Europe, Asia and Latin American.

     The revenues associated with the commercial services businesses are
impacted by fluctuations in interest rates, lease rates, real property values
and the availability of space and competition in the market place. Commercial
service revenues are derived from a broad range of services that are primarily
transaction driven and are therefore volatile in nature and highly competitive.

     The revenues of the property management operations with respect to rental
properties are highly dependent upon the aggregate rents of the properties
managed, which are affected by rental rates and building occupancy rates. Rental
rate increases are dependent upon market conditions and the competitive
environments in the respective locations of the properties. Employee
compensation is the principal cost element of property management.

     Changes in market interest rates on residential mortgage loans and changes
in real property values in northern Ohio and New York City impact the revenues
of the Company's residential brokerage and mortgage origination businesses.
Increases in mortgage interest rates typically result in a weak environment for
single-family home sales in the northern Ohio marketplace, thereby adversely
affecting the revenues and profits of Realty One's home brokerage and mortgage
origination business.

     Recent economic trends in 2001 have been characterized by general slowdowns
in commercial leasing volume in the U.S. and European markets and New York
residential sales volume. Despite the effects of a weakening economy on the
Company's operations, commission fees and property values have not been
materially adversely affected in 2001. Continual declines in interest rates
throughout 2001 have contributed to the improved operations of Realty One
compared to the same period of 2000.

NATURE OF OPERATIONS

     Revenues from tenant representation, agency leasing, investment sales and
residential brokerage, which collectively comprise a substantial portion of
Insignia's service revenues, are transactional in nature and therefore subject
to seasonality and changes in business and capital market conditions. A
significant portion of the expenses associated with transactional activities in
the commercial and residential segments is directly correlated to revenue. Such
seasonal and other factors materially impact the Company's quarterly results,
particularly revenues, earnings and cash flows. The SAB 101 accounting change
affects the timing of revenue recognition and may have an effect on historical
seasonality.

     Consistent with the industry in general, the commercial services segment
has historically experienced its lowest quarterly operating results in the first
quarter of each year as a result of the desire of clients to complete
transactions by calendar year-end. This phenomenon generally results in higher
revenues and income in the last half of the year


                                       27
<PAGE>

and a gradual slowdown in transactional activity and corresponding operating
results during the first quarter. Neither the 2001 nor 2000 years have followed
this typical seasonal pattern. As evidence, second quarter of 2000 was
abnormally robust and even surpassed the good third quarter of that year. In
2001, the Company realized its best ever first quarter, yet produced much lower
second and third quarters than the preceding year due to the deteriorating
effects of economic slowdown on transaction volume.

     The residential services segment is materially impacted by the seasonal
factors of Realty One's home brokerage and mortgage origination business. Due to
the geographic location of Realty One's operations in Ohio, weather conditions
have historically had an adverse effect on single family home sales resulting in
operating losses during the first quarter of each year. The volume of Realty
One's home brokerage and mortgage transactions typically peak during the spring
and summer months, coinciding with both favorable weather conditions and the
increased tendency for moving between school years, resulting in higher revenues
and earnings during the second and third quarters of each year.

FORWARD LOOKING STATEMENTS

     Certain items discussed in this Report constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995 and, as such, involve known and unknown risks, uncertainties and other
factors which may cause the actual results, performance or achievements of the
Company to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. You can
identify such statements by the fact that they do not relate strictly to
historical or current facts. Statements which make reference to the expectations
or beliefs of the Company or any of its management are such forward-looking
statements. These statements use words such as "believe", "expect", "should" and
"anticipate". Such information includes, without limitation, statements
regarding the results of litigation, Insignia's future financial performance,
cash flows, expansion plans, estimated capital expenditures and statements
concerning the performance of the U.S. and international commercial and
residential brokerage markets. Such information also includes statements
regarding the Company's plans to substantially limit its e-commerce business
expenses. Actual results will be affected by a variety of risks and factors,
including, without limitation, international, national and local economic
conditions and real estate and financing risks.

     All such forward-looking statements speak only as of the date of this
Report. The Company expressly disclaims any obligation or undertaking to release
publicly any updates of revisions to any forward-looking statements contained
herein to reflect any change in the Company's expectations with regard thereto
or any change in events, conditions or circumstances on which any such statement
is based.

Item 3. Quantitative and Qualitative Disclosure of Market Risk
--------------------------------------------------------------

     Insignia is exposed to a variety of market risks, including foreign
currency exchange rate fluctuations and changes in interest rates. The Company's
earnings and cash flows are subject to fluctuations due to changes in foreign
currency exchange rates from the Company's operations in foreign jurisdictions.
In addition to the United States, the Company conducts business in the following
foreign jurisdictions: the U.K., Germany, Italy, Belgium, Ireland, the
Netherlands, Spain, Hong Kong, China, Thailand, India and Mexico. The British
Pound (Sterling) represents the only foreign currency of a material business
operation, as almost 90% of Insignia's foreign operations are derived in the
U.K.

     The Company's financial results could be significantly affected by factors
such as fluctuations in foreign currency exchange rates and weak economic
conditions in these foreign markets. These foreign factors have not had a
material adverse effect on the Company; however, they could potentially have a
material adverse affect on the Company's future financial position and results
of operations. A 10% change in the British pound could have an estimated annual
impact of approximately $10 million on revenues and $1 million on net earnings.

     The Company's interest income and expense are most sensitive to the changes
in the general level of interest rates. In this regard, changes in interest
rates affect the interest earned on the Company's cash equivalents and
short-term investments as well as interest paid on its debt. Interest rates are
sensitive to many factors including governmental monetary and tax policies,
domestic and international economic and political considerations and other
factors that are beyond the Company's control. A 100 basis point change in
interest rates at current cash and debt levels would have an estimated annual
net impact of approximately $1 million on the Company's results of


                                       28
<PAGE>

operations. Additionally, changes in interest rates can have a material effect
on Realty One's home brokerage and mortgage origination business in northern
Ohio.

                           PART II - OTHER INFORMATION

Item 1. Legal Proceedings

     See Note 12 - "Material Contingencies" in Notes to Condensed Consolidated
Financial Statements, Part I, Item 1, of this Form 10-Q.

Item 4. Submission of Matters to a Vote of Security Holders
-----------------------------------------------------------

     The Annual Meeting of Stockholders of the Company was held on May 23, 2001,
at 9:00 a.m., Eastern Time, to vote on the following items:

1.   Election of three nominees for election to the Company's Board of
     Directors, each for a term of three years expiring in 2004, all of which
     were elected.

<TABLE>
<CAPTION>
                                 NUMBER OF             NUMBER OF             NUMBER OF       % OF VOTES
            NAME             SHARES APPROVING       SHARES WITHHELD      BROKER NON-VOTES       CAST
      --------------------------------------------------------------------------------------------------
      <S>                    <C>                     <C>                 <C>                <C>
      Andrew L. Farkas          16,330,424              779,948                 --              95.4%
      Stephen B. Siegel         16,330,500              779,872                 --              95.4%
      Stephen M. Ross           16,777,743              332,629                 --              98.1%
</TABLE>

2.   Ratification of appointment of Ernst & Young, LLP as the Company's
     independent auditors for the year ending December 31, 2001.

                                   NUMBER OF       % OF VOTES
                                     SHARES            CAST
                                --------------------------------
      For                          17,080,173         99.8%
      Against                          17,054
      Withheld                         13,145
      Broker Non-Votes                     --
                                -------------
                                   17,110,372
                                =============


There were no other matters brought to a vote before the security holders.

Item 6. Exhibits and Reports on Form 8-K
----------------------------------------

     a)  Exhibits

         10.2(a)  Amendment to Employment Agreement, effective as of August 3,
                  2001, by and among Insignia and Ronald Uretta.

     b) Reports on Form 8-K filed during the quarter ended September 30, 2001:

         1.       Form 8-K dated and filed August 28, 2001, disclosing the
                  announcement that Insignia entered into a definitive agreement
                  to acquire Groupe Bourdais, headquartered in Paris, France.



                                       29
<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.


                                        INSIGNIA FINANCIAL GROUP, INC.



                                        By: /s/Andrew L. Farkas
                                            ------------------------------------
                                            Andrew L. Farkas
                                            Chairman and Chief Executive Officer




                                        By: /s/James A. Aston
                                            ------------------------------------
                                            James A. Aston
                                            Chief Financial Officer


                                       30