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

                                  Form 10-QSB/A

(Mark One)
[X]    QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
       ACT OF 1934

                 For the quarterly period ended September 30, 2002


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

              For the transition period from __________ to __________

                         Commission file number 0-10673


                       REAL ESTATE ASSOCIATES LIMITED III
                       (A California Limited Partnership)


          California                                            95-3547611
(State or other jurisdiction of                               (I.R.S. Employer
 incorporation or organization                               Identification No.)

                          55 Beattie Place, PO Box 1089
                        Greenville, South Carolina 29602
                    (Address of principal executive offices)

                                 (864) 239-1000
                           (Issuer's telephone number)

<PAGE>

                                Explanatory Note

This document amends the Form 10-QSB for the quarter ended September 30, 2002 to
properly  reflect  the  Partnership's   application  of  the  equity  method  of
accounting  and to include  financial  statements  that have been reviewed by an
independent  accountant  as required by Rule  10-01(d) of  Regulation  S-X.  The
Partnership  incorrectly  recognized equity in income of limited partnerships in
the amount of $478,221  during the three and nine  months  ended  September  30,
2002,  resulting in an  understatement of the net loss for the nine month period
ended September 30, 2002 and a corresponding  overstatement of the investment in
limited  partnerships  and partners' equity as of September 30, 2002. This error
has been  corrected  in the  restated  financial  statements.  This  document is
accompanied by the certifications required by the Sarbanes-Oxley Act of 2002 and
Rules 13a-14 and 15d-14  promulgated under the Securities  Exchange Act of 1934,
as amended.



<PAGE>




                       REAL ESTATE ASSOCIATES LIMITED III
                       (a California limited partnership)

                             INDEX TO FORM 10-QSB/A

                    FOR THE QUARTER ENDED SEPTEMBER 30, 2002




PART I.     FINANCIAL INFORMATION

      ITEM 1.     FINANCIAL STATEMENTS

                  Balance Sheet,
                    September 30, 2002                                         1

                  Statements of Operations
                    Three and Nine months Ended September 30, 2002 and 2001    2

                  Statement of Partners' (Deficiency) Equity,
                    Nine months Ended September 30, 2002                       3

                  Statements of Cash Flows
                    Nine months Ended September 30, 2002 and 2001              4

                  Notes to Financial Statements                                5

      ITEM 2.     MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION   12

      ITEM 3.     Controls and Procedures                                     14

PART II.    OTHER INFORMATION

      ITEM 1.     LEGAL PROCEEDINGS                                           15

      ITEM 5.     OTHER INFORMATION                                           15

      ITEM 6.     EXHIBITS AND REPORTS ON FORM 8-K                            16

      SIGNATURES                                                              17

      CERTIFICATIONS                                                          18

      EXHIBIT                                                                 20


<PAGE>




                         PART I - FINANCIAL INFORMATION


ITEM 1.     FINANCIAL STATEMENTS



                       REAL ESTATE ASSOCIATES LIMITED III
                       (a California limited partnership)

                                  BALANCE SHEET

                               SEPTEMBER 30, 2002
                                   (Unaudited)
                                   (Restated)


                              ASSETS

Investments in limited partnerships (Note 2)                       $   102,078
Cash and cash equivalents                                            1,983,073

            Total assets                                           $ 2,085,151

          LIABILITIES AND PARTNERS' (DEFICIENCY) EQUITY

Liabilities:
   Accounts payable and accrued expenses                           $    62,090
   Advances due to affiliates                                            4,750
                                                                        66,840
Commitments and Contingencies (Notes 3 and 4)

Partners' (Deficiency) Equity:
   General partners                                                   (148,794)
   Limited partners                                                  2,167,105
                                                                     2,018,311
            Total liabilities and partners' (deficiency) equity    $ 2,085,151


     The accompanying notes are an integral part of these financial statements.



<PAGE>





                       REAL ESTATE ASSOCIATES LIMITED III
                       (a California limited partnership)

                            STATEMENTS OF OPERATIONS

          FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001
                                   (Unaudited)

<TABLE>
<CAPTION>


                                              Three Months Ended           Nine Months Ended
                                                 September 30,               September 30,
                                              2002          2001           2002          2001
                                           (Restated)                   (Restated)
<S>                                       <C>           <C>           <C>            <C>
Interest and Other Income                 $    17,315   $    50,750   $    32,940    $    169,600

operating Expenses:
  Management fee - partners (Note 3)           32,322        32,322        96,941          96,967
  General and administrative (Note 3)          22,972       114,635        72,347         154,223
  Legal and accounting                         22,211       175,206        90,595         392,819
        Total operating expenses               77,505       322,163       259,883         644,009

Loss from Partnership operations              (60,190)     (271,413)     (226,943)       (474,409)
Distributions from limited partnerships
  recognized as income (Note 2)                    --            --        33,903          21,925
Equity in income (loss) of limited
  partnerships and amortization of
  acquisition costs (Notes 1 and 2)                --        53,071      (307,922)        162,546

Net loss                                  $   (60,190)  $  (218,342)   $ (500,962)    $  (289,938)
Net loss allocated to general
 partners (1%)                            $      (602)  $    (2,183)   $   (5,010)    $    (2,899)
Net loss allocated to limited
 partners (99%)                               (59,588)     (216,159)     (495,952)       (287,039)

                                          $   (60,190)  $  (218,342)   $ (500,962)    $   289,938
Net loss per limited
  partnership interest (Note 1)           $        (5)  $       (19)   $      (43)    $       (25)


     The accompanying notes are an integral part of these financial statements.
</TABLE>


<PAGE>




                       REAL ESTATE ASSOCIATES LIMITED III
                       (a California limited partnership)

                   STATEMENT OF PARTNERS' (DEFICIENCY) EQUITY

                  FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2002
                                   (Unaudited)
                                   (Restated)


<TABLE>
<CAPTION>

                                        General          Limited
                                       Partners          Partners          Total

<S>                                                         <C>
Partnership interests                                       11,456

Partners' (deficiency) equity,
  January 1, 2002                     $ (143,784)       $2,663,057       $2,519,273

Net loss for the nine months
  ended September 30, 2002                (5,010)         (495,952)        (500,962)

Partners' (deficiency) equity,
  September 30, 2002                  $ (148,794)       $2,167,105       $2,018,311


     The accompanying notes are an integral part of these financial statements.
</TABLE>


<PAGE>




                       REAL ESTATE ASSOCIATES LIMITED III
                       (a California limited partnership)

                            STATEMENTS OF CASH FLOWS

               FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001
                                   (Unaudited)

<TABLE>
<CAPTION>

                                                                      2002            2001
CASH FLOWS FROM OPERATING ACTIVITIES:                              (Restated)

<S>                                                                <C>             <C>
  Net loss                                                         $ (500,962)     $ (289,938)
  Adjustments to reconcile net loss to net cash
   used in operating activities:
     Equity in loss (income) of limited partnerships and
      amortization of acquisition costs                               307,922        (162,546)
     Increase in interest and other payables                               --          54,790
     Increase in advances due to affiliates                               250              --
     Decrease in accounts payable and accrued expenses                 (2,368)             --
         Net cash used in operating activities                       (195,158)       (397,694)

cash flow from investing activities:
     Distributions from limited partnership recognized
       as return of capital                                                --          41,227

NET DECREASE IN CASH AND CASH EQUIVALENTS                            (195,158)       (356,467)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                      2,178,231       5,655,763

CASH AND CASH EQUIVALENTS, END OF PERIOD                          $ 1,983,073     $ 5,299,296


     The accompanying notes are an integral part of these financial statements.
</TABLE>


<PAGE>


                       REAL ESTATE ASSOCIATES LIMITED III
                       (a California limited partnership)

                          NOTES TO FINANCIAL STATEMENTS

                               SEPTEMBER 30, 2002

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

General

The information  contained in the following notes to the financial statements is
condensed  from  that  which  would  appear  in  the  annual  audited  financial
statements;  accordingly,  the financial  statements  included  herein should be
reviewed in conjunction with the financial  statements and related notes thereto
contained  in the Real  Estate  Associates  Limited  III (the  "Partnership"  or
"Registrant")  annual  report  for the  fiscal  year ended  December  31,  2001.
Accounting  measurements at interim dates inherently involve greater reliance on
estimates  than at year end. The results of operations  for the interim  periods
presented are not necessarily  indicative of the results expected for the entire
year.

In  the  opinion  of  the  Partnership,  the  accompanying  unaudited  financial
statements  contain all adjustments  (consisting  primarily of normal  recurring
accruals) necessary to present fairly the financial position as of September 30,
2002 and the results of  operations  and changes in cash flows for the three and
nine months ended September 30, 2002 and 2001, respectively.

The general  partners  collectively  have a one percent  interest in profits and
losses of the  Partnership.  The limited  partners have the remaining 99 percent
interest  which  is  allocated  in  proportion  to their  respective  individual
investments.  The general  partners of the Partnership are National  Partnership
Investments  Corporation ("NAPICO" or the "Corporate General Partner") and Coast
Housing Investments Associates Limited Partnership.

 On December 3, 2001,  Casden  Properties Inc.,  entered into a merger agreement
and certain other transaction documents with Apartment Investment and Management
Company,  ("AIMCO"), a publicly traded real estate investment trust, and certain
of its subsidiaries, pursuant to which, on March 11, 2002, AIMCO acquired Casden
Properties Inc. and its subsidiaries,  including 100% of the outstanding capital
stock of NAPICO.
Prior to March 11, 2002, Casden Properties Inc. owned a 95.25% economic interest
in NAPICO, with the balance owned by Casden Investment Corporation ("CIC"). CIC,
which is wholly owned by Alan I. Casden, owned 95% of the voting common stock of
NAPICO prior to March 11, 2002.

Basis of Presentation

The  accompanying  financial  statements  have been prepared in conformity  with
accounting principles generally accepted in the United States of America.

Method of Accounting for Investment in Limited Partnerships

The  investment in limited  partnerships  is accounted for on the equity method.
Acquisition,  selection  and  other  costs  related  to the  acquisition  of the
projects  are  capitalized  as  part of the  investment  account  and are  being
amortized by the straight line method over the estimated lives of the underlying
assets, which is generally 30 years.

Net Income (Loss) Per Limited Partnership Interest

Net income (loss) per limited partnership  interest was computed by dividing the
limited  partners'  share  of net  loss by the  number  of  limited  partnership
interests  outstanding  during the  period.  The  number of limited  partnership
interests was 11,456 for the periods presented.

Cash and Cash Equivalents

Cash and cash  equivalents  consist of cash and money market mutual  funds.  The
Partnership  has its cash and cash  equivalents  on deposit  primarily  with two
money market mutual funds. Such cash and cash equivalents are uninsured.

Impairment of Long-Lived Assets

The  Partnership  reviews  long-lived  assets to determine if there has been any
permanent  impairment whenever events or changes in circumstances  indicate that
the  carrying  amount  of the asset  may not be  recoverable.  If the sum of the
expected future cash flows is less than the carrying  amount of the assets,  the
Partnership  recognizes an impairment loss. The Partnership  determined that its
investment  balance in one of its Local  Limited  Partnerships  was impaired and
recognized an impairment loss of  approximately  $300,000 during the nine months
ended September 30, 2002.

Recent Accounting Pronouncements

In  January  2003,  the  FASB  issued  FASB  Interpretation  No.  46  ("FIN46"),
Consolidation of Variable  Interest  Entities,  an Interpretation of ARB No. 51.
FIN46 requires  certain  variable  interest  entities to be  consolidated by the
primary  beneficiary of the entity if the equity  investors in the entity do not
have the  characteristics  of a  controlling  financial  interest or do not have
sufficient  equity at risk for the  entity to  finance  its  activities  without
additional subordinated financial support from other parties. FIN46 is effective
for all new variable  interest  entities  created or acquired  after January 31,
2003. For variable  interest  entities  created or acquired prior to February 1,
2003,  the  provisions  of FIN46 must be applied for the first interim or annual
period  beginning after June 15, 2003. The  Partnership is currently  evaluating
the  effect,  if any,  that the  adoption  of FIN46 will have on its  results of
operations and financial condition.

NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS

The Partnership  incorrectly recognized equity in income of limited partnerships
in the amount of $478,221  during the three and nine months ended  September 30,
2002,  resulting  in an  understatement  of the net loss for the  three and nine
months  ended  September  30,  2002  and a  corresponding  overstatement  of the
investment  in limited  partnerships  and  partners'  equity as of September 30,
2002. This error has been corrected in the restated financial statements.

The  following  table  sets forth the  adjustments  to the  balance  sheet as of
September  30,  2002 and the  statements  of  operations  for the three and nine
months  ended  September  30,  2002.  The only  financial  statement  line items
included  here are those that have been restated  from the  originally  reported
amounts.

<TABLE>
<CAPTION>

                                                         As of September 30, 2002
                                                      As previously
                                                        reported        As restated
Balance sheet data:
<S>                                                    <C>               <C>
Investments in limited partnerships                    $  580,299        $  102,078
Total assets                                            2,563,372         2,085,151
Partners' equity                                        2,496,532         2,018,311
Total liabilities and partners'
 (deficit) equity                                       2,563,372         2,085,151
</TABLE>


<TABLE>
<CAPTION>

                                     Three Months Ended            Nine Months Ended
                                     September 30, 2002            September 30, 2002
                                 As previously                As previously
                                   reported      As restated     reported     As restated

Equity in income (loss) of
 limited partnerships and
<S>                             <C>             <C>            <C>            <C>
 amortization costs             $478,221        $     --       $170,299       $(307,922)
Net income (loss)                418,031         (60,190)       (22,741)       (500,962)
Net income (loss) loss
 allocated to general
partners                           4,180            (602)          (227)         (5,010)
Net income (loss)  allocated
 to limited partners             413,851         (59,588)       (22,514)       (495,952)
Net income (loss) per limited
 partnership interest                 36              (5)            (2)            (43)
</TABLE>

As of September 30, 2002, the Partnership holds limited partnership interests in
11 limited partnerships (the "Local Partnerships"). In addition, the Partnership
holds a general partner  interest in Real Estate  Associates  ("REA"),  which in
turn,  holds a limited  partner  interest in one additional  Local  Partnership.
NAPICO is also a general  partner in REA. In total,  therefore  the  Partnership
holds  interests,  either  directly  or  indirectly  through  REA,  in 12  Local
Partnerships  which own  residential  low income rental  projects  consisting of
1,182  apartment  units.  The mortgage loans of these projects are payable to or
insured by various governmental agencies.

The  Partnership,  as a limited  partner,  does not  exercise  control  over the
activities and operations,  including  refinancing or selling decisions,  of the
Local Partnerships. Accordingly, the Partnership accounts for its investments in
the Local  Partnerships  using the equity method.  The  Partnership is allocated
profits and losses of the Local Partnerships based upon its respective ownership
percentage  (between 94.9% and 99%). The  Partnership is also entitled to 99% of
the  profits and losses of REA.  REA is entitled to a 99%  interest in the Local
Partnership  in  which it has  invested.  Distributions  of  surplus  cash  from
operations  from  most of the Local  Partnerships  are  restricted  by the Local
Partnerships' Regulatory Agreements with the United States Department of Housing
and Urban Development  ("HUD").  These  restrictions limit the distribution to a
portion,  generally less than 10%, of the initial invested  capital.  The excess
surplus  cash is  deposited  into a  residual  receipts  reserve,  of which  the
ultimate  realization by the Partnership is uncertain as HUD frequently  retains
it upon  sale or  dissolution  of the  Local  Partnership.  The  Partnership  is
allocated  profits and losses and receives  distributions  from refinancings and
sales in accordance with the Local Partnerships'  partnership agreements.  These
agreements   usually  limit  the   Partnership's   distributions  to  an  amount
substantially less than its ownership percentage in the Local Partnership.

The individual  investments are carried at cost plus the Partnership's  share of
the  Local  Partnership's  profits  less the  Partnership's  share of the  Local
Partnership's  losses,  distributions  and  impairment  charges.  See  "Note 1 -
Organization and Summary of Significant  Accounting  Policies" for a description
of the  impairment  policy.  The  Partnership  is not  legally  liable  for  the
obligations of the Local Partnerships and is not otherwise  committed to provide
additional  support to them.  Therefore,  it does not recognize  losses once its
investment in each of the Local  Partnerships  reaches zero.  Distributions from
the Local  Partnerships  are  accounted  for as a  reduction  of the  investment
balance until the  investment  balance is reduced to zero.  When the  investment
balance  has  been  reduced  to  zero,  subsequent  distributions  received  are
recognized as income in the accompanying statements of operations.

For those  investments  where the  Partnership  has determined that the carrying
value  of its  investments  approximates  the  estimated  fair  value  of  those
investments,  the  Partnership's  policy is to recognize equity in income of the
Local Partnerships only to the extent of distributions received and amortization
of acquisition costs from those Local Partnerships.  Therefore,  the Partnership
limits its recognition of equity earnings to the amount it expects to ultimately
realize.

The  Partnership  determined  that its  investment  balance  in one of its Local
Limited   Partnerships  was  impaired  and  recognized  an  impairment  loss  of
approximately $300,000 during the nine months ended September 30, 2002.

The following is a summary of the investments in Local Partnerships for the nine
months ended September 30, 2002:

           Balance, beginning of period                    $ 410,000
           Amortization of acquisition costs                  (1,666)
           Equity in loss of limited partnerships           (306,256)
           Balance, end of period                          $ 102,078

The  following  are  unaudited   condensed  combined  estimated   statements  of
operations  for the three and nine months ended  September 30, 2002 and 2001 for
the Local Partnerships in which the Partnership has investments:

<TABLE>
<CAPTION>

                               Three Months Ended              Nine Months Ended
                                 September 30,                   September 30,
                              2002           2001             2002            2001
Revenues
<S>                       <C>             <C>             <C>             <C>
  Rental and other        $ 1,681,000     $ 1,646,000     $ 5,043,000     $ 4,938,000

Expenses
  Depreciation                303,000         320,000         908,000         960,000
  Interest                    367,000         450,000       1,101,000       1,350,000
  Operating                 1,154,000       1,003,000       3,463,000       3,009,000

                            1,824,000       1,773,000       5,472,000       5,319,000

Net loss                   $ (143,000)    $ (127,000)      $ (429,000)     $ (381,000)
</TABLE>

Under recent adopted law and policy, the United States Department of Housing and
Urban  Development  ("HUD") has determined  not to renew the Housing  Assistance
Payment  ("HAP")  Contracts  on a  long-term  basis on the  existing  terms.  In
connection with renewals of the HAP Contracts under such new law and policy, the
amount of rental  assistance  payments under renewed HAP Contracts will be based
on market rentals instead of above market  rentals,  which may be the case under
existing HAP Contracts.  The payments under the renewed HAP Contracts may not be
in an amount  that  would  provide  sufficient  cash  flow to  permit  owners of
properties  subject to HAP  Contracts to meet the debt service  requirements  of
existing  loans  insured by the Federal  Housing  Administration  of HUD ("FHA")
unless such mortgage loans are  restructured.  In order to address the reduction
in  payments  under HAP  Contracts  as a result of this new  policy,  the Multi-
family Assisted Housing Reform and Affordability Act of 1997 ("MAHRAA") provides
for the  restructuring  of  mortgage  loans  insured by the FHA with  respect to
properties  subject  to the  Section 8 program.  Under  MAHRAA,  an  FHA-insured
mortgage  loan can be  restructured  into a first  mortgage  loan  which will be
amortized on a current basis and a low interest  second mortgage loan payable to
FHA which will only be payable on  maturity  of the first  mortgage  loan.  This
restructuring results in a reduction in annual debt service payable by the owner
of the  FHA-insured  mortgage  loan and is  expected  to result in an  insurance
payment from FHA to the holder of the  FHA-insured  loan due to the reduction in
the principal amount. MAHRAA also phases out project-based subsidies on selected
properties  serving  families not located in rental markets with limited supply,
converting such subsidies to a tenant-based subsidy.

When the HAP  Contracts are subject to renewal,  there can be no assurance  that
the local limited  partnerships  in which the Partnership has an investment will
be permitted to restructure its mortgage indebtedness under MAHRAA. In addition,
the  economic  impact  on the  Partnership  of the  combination  of the  reduced
payments  under  the  HAP  Contracts  and  the  restructuring  of  the  existing
FHA-insured mortgage loans under MAHRAA is uncertain.

<PAGE>

NOTE 3 - TRANSACTIONS WITH AFFILIATED PARTIES

Under  the  terms  of  the  Restated   Certificate   and  Agreement  of  Limited
Partnership, the Partnership is obligated to NAPICO for an annual management fee
approximately  equal to 0.4 percent of the invested assets.  Invested assets are
defined as the costs of acquiring project interests, including the proportionate
amount of the  mortgage  loans  related to the  Partnership's  interests  in the
capital accounts of the respective partnership.  The management fee incurred for
both the nine month periods ended September 30, 2002 and 2001 was  approximately
$97,000.

The Partnership  reimburses NAPICO for certain expenses.  The reimbursement paid
to NAPICO  was  approximately  $11,000  for both the nine  month  periods  ended
September  30, 2002 and 2001,  and is  included  in general  and  administrative
expenses.

NOTE 4 - CONTINGENCIES

On August 27, 1998, two investors holding an aggregate of eight units of limited
partnership  interests in the Partnership and two investors holding an aggregate
of five units of limited partnership interests in Real Estate Associates Limited
VI (an affiliated  partnership in which NAPICO is the corporate general partner)
commenced an action in the United States District Court for the Central District
of California against the Partnership,  NAPICO and certain other defendants. The
complaint  alleged that the  defendants  breached  their  fiduciary  duty to the
limited partners of certain NAPICO managed  partnerships and violated securities
laws by  making  materially  false  and  misleading  statements  in the  consent
solicitation  statements  sent to the  limited  partners  of  such  partnerships
relating  to  approval  of the  transfer  of  partnership  interests  in limited
partnerships,  owning  certain  of  the  properties,  to  affiliates  of  Casden
Properties  Inc.,  organized by an affiliate of NAPICO.  The  plaintiffs  sought
equitable relief, as well as compensatory  damages and litigation related costs.
On August 4, 1999, one investor holding one unit of limited partnership interest
in Housing Programs Limited (another  affiliated  partnership in which NAPICO is
the corporate  general  partner)  commenced a virtually  identical action in the
United States District Court for the Central District of California  against the
Partnership,  NAPICO and certain other entities.  The second action was subsumed
in the first action,  and was  certified as a class action.  On August 21, 2001,
plaintiffs filed a supplemental complaint,  which added new claims,  including a
rescission  of the transfer of  partnership  interests  and an  accounting.  The
matter was tried in October  and  November  2002.  In  November  2002,  the jury
returned  special  verdicts  against NAPICO and certain other  defendants in the
amount of  approximately  $25.2 million for  violations  of securities  laws and
against NAPICO for  approximately  $67.3 million for breaches of fiduciary duty.
In addition,  the jury awarded the plaintiffs punitive damages against NAPICO of
approximately  $92.5  million.  NAPICO and the other  defendants  have submitted
motions  seeking to set aside the verdict in its  entirety,  with oral  argument
scheduled for March 2003.  While the matter is not yet final and no judgment has
been entered,  the matter is the  responsibility  of the former  shareholders of
Casden Properties Inc. pursuant to the documents related to AIMCO's  acquisition
of Casden Properties Inc., which was completed in March 2002.

Consent Solicitation

In March 2001, a limited  partner of the  Partnership,  which acquired its units
through a tender offer, commenced a consent solicitation to remove NAPICO as the
Corporate  General  Partner of the  Partnership.  In April 2001, the Partnership
commenced an action to enjoin the  solicitation  alleging  that the  information
contained  in the  solicitation  was  materially  false  and  misleading  and in
violation of the federal  securities  laws. In November  2002, a settlement  was
reached  between  NAPICO and the limited  partner  whereby  the lawsuit  will be
dismissed,  NAPICO  will  remain the  Corporate  General  Partner and all claims
between the parties will be released.

The Corporate General Partner of the Partnership is involved in various lawsuits
arising from transactions in the ordinary course of business.  In the opinion of
management and the Corporate General Partner,  the claims will not result in any
material liability to the Partnership.

Millenium   Management,   LLC  ("Millenium")  and  Everest  Properties  II,  LLC
("Everest") have filed with the SEC a preliminary Consent Solicitation Statement
requesting the consent of the limited partners of Real Estate Associates Limited
III  (the   "Partnership")  to  remove  the  current  general  partners  of  the
Partnership  and to elect  Millenium  as the new  general  partner.  The General
Partners are reviewing the preliminary Consent Solicitation Statement.

NOTE 5 - FAIR VALUE OF FINANCIAL INSTRUMENTS

Statement of Financial  Accounting  Standards  No. 107,  "Disclosure  about Fair
Value of Financial  Instruments,"  requires disclosure of fair value information
about financial instruments. The carrying amount of other assets and liabilities
reported on the balance  sheet that require such  disclosure  approximates  fair
value due to their short-term maturity.

NOTE 6 - SUBSEQUENT EVENT

Subsequent to September 30, 2002,  the  Partnership  sold its interest in Sunset
Grove, a Limited Partnership, to an unrelated third party and realized a gain of
$210,000. The gain is equal to the net proceeds received by the Partnership,  as
the  Partnership  had no remaining  investment  balance  related to this limited
partnership.

ITEM 2.     MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

The matters discussed in this report contain certain forward-looking statements,
including, without limitation, statements regarding future financial performance
and the effect of government  regulations.  The discussions of the  Registrant's
business  and  results  of  operations,   including  forward-looking  statements
pertaining to such matters,  do not take into account the effects of any changes
to the  Registrant's  business  and results of  operations.  Actual  results may
differ  materially  from those described in the  forward-looking  statements and
will  be  affected  by  a  variety  of  risks  and  factors  including,  without
limitation:  national and local economic  conditions;  the terms of governmental
regulations that affect the Registrant and interpretations of those regulations;
the competitive  environment in which the Registrant operates;  financing risks,
including the risk that cash flows from  operations may be  insufficient to meet
required  payments of  principal  and  interest;  real estate  risks,  including
variations  of real  estate  values and the  general  economic  climate in local
markets and competition for tenants in such markets; and possible  environmental
liabilities.   Readers  should  carefully  review  the  Registrant's   financial
statements and the notes thereto,  as well as the risk factors  described in the
documents  the  Registrant  files  from  time to time  with the  Securities  and
Exchange Commission.

The Corporate  General  Partner  monitors  developments in the area of legal and
regulatory   compliance  and  is  studying  new  federal  laws,   including  the
Sarbanes-Oxley  Act of 2002. The Sarbanes-Oxley Act of 2002 mandates or suggests
additional compliance measures with regard to governance,  disclosure, audit and
other areas.  In light of these changes,  the  Partnership  expects that it will
incur higher expenses related to compliance, including increased legal and audit
fees.

Liquidity and Capital Resources

The  Partnership's  primary sources of funds include interest income earned from
investing  available cash and distributions  from limited  partnerships in which
the  Partnership  has  invested.  It is not  expected  that  any  of  the  Local
Partnerships  in which the  Partnership  has invested  will  generate  cash flow
sufficient  to provide for  distributions  to limited  partners in any  material
amount.

Results of Operations

Partnership  revenues  consist  primarily of interest income earned on temporary
investment  of funds not  required for  investment  in Local  Partnerships.  The
decrease  in  interest  and other  income  for the three and nine  months  ended
September 30, 2002, is due to lower  interest  rates combined with lower average
cash balances maintained in interest bearing accounts.

An annual  management  fee is payable to the  Corporate  General  Partner of the
Partnership  and is  calculated  at 0.4  percent of the  Partnership's  invested
assets.  The  management  fee is paid to the Corporate  General  Partner for its
continuing  management of the Partnership  affairs. The fee is payable beginning
with  the  month  following  the  Partnership's  initial  investment  in a Local
Partnership.  Management fees were $96,941 and $96,967 for the nine months ended
September 30, 2002 and 2001, respectively.

Operating  expenses,  exclusive  of the  management  fee,  consist  of legal and
accounting  fees for  services  rendered  to the  Partnership  and  general  and
administrative expenses. Legal and accounting fees were $90,595 and $392,819 for
the nine months ended September 30, 2002 and 2001, respectively. The decrease in
legal fees during 2002 is related to the consent solicitation lawsuit, discussed
in  Note  4  -  Contingencies,  that  originated  in  April  2001.  General  and
administrative  expenses  were  $72,347 and  $154,223  for the nine months ended
September  30,  2002  and  2001,  respectively.  The  decrease  in  general  and
administrative  expenses is attributable  to a decrease in the costs  associated
with the  preparation  and  filing of the  Partnership's  quarterly  and  annual
financial  statements  and a  decrease  in costs  associated  with  the  consent
solicitation lawsuit.


The  Partnership,  as a limited  partner,  does not  exercise  control  over the
activities and  operations,  including  refinancing or selling  decisions of the
Local Partnerships.  Accordingly, the Partnership accounts for its investment in
the Local Partnerships using the equity method. Thus the individual  investments
are  carried  at cost plus the  Partnership's  share of the Local  Partnership's
profits  less the  Partnership's  share of the Local  Partnership's  losses  and
distributions  and impairment  charges.  However,  since the  Partnership is not
legally  liable  for  the  obligations  of  the  Local  Partnerships,  or is not
otherwise committed to provide additional support to them, it does not recognize
losses  once its  investment  in each of the Local  Partnerships  reaches  zero.
Distributions  from the Local  Partnerships  are accounted for as a reduction of
the  investment  balance  until  the  investment  balance  is  reduced  to zero.
Subsequent  distributions  received are recognized as income in the accompanying
statements  of  operations.  For those  investments  where the  Partnership  has
determined that the carrying value of its investments approximates the estimated
fair value of those investments, the Partnership's policy is to recognize equity
in  income  of the  Local  Partnerships  only  to the  extent  of  distributions
received,  and amortization of acquisition costs from those Local  Partnerships.
During the nine months ended  September  30, 2001,  the  Partnership  recognized
equity in income of $162,546 from Local Partnerships. The Partnership recognized
equity in loss of $307,922  from Local  Partnerships  for the nine months  ended
September  30,  2002.   Included  in  this  amount  is  an  impairment  loss  of
approximately  $300,000 related to a Local  Partnership.  During the nine months
ended September 30, 2002 and 2001, the Partnership received $33,903 and $21,925,
respectively,  in distributions  from Local Partnerships that were recognized as
income in the statements of operations since the Partnership's investment in the
Local Partnerships has been reduced to zero.

Except for money  market  funds,  the  Partnership's  investments  are  entirely
interests in other Local Partnerships owning government assisted projects. Funds
temporarily not required for such  investments in projects are invested in money
market funds which  provide  interest  income as reflected in the  statements of
operations.  These  investments  can  be  readily  converted  to  cash  to  meet
obligations as they arise.

Under recent adopted law and policy, the United States Department of Housing and
Urban  Development  ("HUD") has determined  not to renew the Housing  Assistance
Payment  ("HAP")  Contracts  on a long  term  basis on the  existing  terms.  In
connection with renewals of the HAP Contracts under such new law and policy, the
amount of rental  assistance  payments under renewed HAP Contracts will be based
on market rentals instead of above market  rentals,  which may be the case under
existing HAP Contracts.  The payments under the renewed HAP Contracts may not be
in an amount  that  would  provide  sufficient  cash  flow to  permit  owners of
properties  subject to HAP  Contracts to meet the debt service  requirements  of
existing  loans  insured by the Federal  Housing  Administration  of HUD ("FHA")
unless such mortgage loans are  restructured.  In order to address the reduction
in payments under HAP Contracts as a result of this new policy, the Multi-family
Assisted Housing Reform and  Affordability  Act of 1997 ("MAHRAA")  provides for
the  restructuring  of  mortgage  loans  insured  by the  FHA  with  respect  to
properties  subject  to the  Section 8 program.  Under  MAHRAA,  an  FHA-insured
mortgage  loan can be  restructured  into a first  mortgage  loan  which will be
amortized on a current basis and a low interest  second mortgage loan payable to
FHA which will only be payable on  maturity  of the first  mortgage  loan.  This
restructuring results in a reduction in annual debt service payable by the owner
of the  FHA-insured  mortgage  loan and is  expected  to result in an  insurance
payment from FHA to the holder of the  FHA-insured  loan due to the reduction in
the principal amount. MAHRAA also phases out project-based subsidies on selected
properties  serving  families not located in rental markets with limited supply,
converting such subsidies to a tenant-based subsidy.

When the HAP  Contracts are subject to renewal,  there can be no assurance  that
the  Local  Partnerships  in which the  Partnership  has an  investment  will be
permitted to restructure its mortgage  indebtedness  under MAHRAA.  In addition,
the  economic  impact  on the  Partnership  of the  combination  of the  reduced
payments  under  the  HAP  Contracts  and  the  restructuring  of  the  existing
FHA-insured mortgage loans under MAHRAA is uncertain.

AIMCO and its affiliates currently do not own any limited partnership units (the
"Units") in the  Partnership.  It is possible that AIMCO or its affiliates  will
acquire units of limited partnership interest in the Partnership in exchange for
cash or a combination  of cash and units in the operating  partnership of AIMCO.
Under the Partnership Agreement, unitholders holding a majority of the Units are
entitled  to take  action  with  respect to a variety of  matters,  which  would
include voting on certain amendments to the Partnership  Agreement and voting to
remove the Corporate  General  Partner.  Although the Corporate  General Partner
owes fiduciary duties to the limited partners of the Partnership,  the Corporate
General partner also owes fiduciary duties to AIMCO as its sole stockholder.  As
a result,  the duties of the Corporate  General  Partner,  as corporate  general
partner, to the Partnership and its limited partners may come into conflict with
the duties of the Corporate General Partner to AIMCO, as its sole stockholder.

ITEM 3.     CONTROLS AND PROCEDURES

The principal executive officer and principal financial officer of the Corporate
General Partner, who are the equivalent of the Partnership's principal executive
officer and principal financial officer,  respectively,  have, within 90 days of
the filing date of this amended quarterly report, evaluated the effectiveness of
the Partnership's disclosure controls and procedures (as defined in Exchange Act
Rules 13a-14(c) and 15d-14(c)) and have determined that such disclosure controls
and  procedures  are  adequate.  There have been no  significant  changes in the
Partnership's  internal  controls or in other  factors that could  significantly
affect the  Partnership's  internal  controls since the date of evaluation.  The
Partnership does not believe any significant deficiencies or material weaknesses
exist in the Partnership's internal controls, accordingly, no corrective actions
have been taken.

<PAGE>

                           PART II - OTHER INFORMATION

ITEM 1.     LEGAL PROCEEDINGS

On August 27, 1998, two investors holding an aggregate of eight units of limited
partnership  interests in the Partnership and two investors holding an aggregate
of five units of limited partnership interests in Real Estate Associates Limited
VI (an affiliated  partnership in which NAPICO is the corporate general partner)
commenced an action in the United States District Court for the Central District
of California against the Partnership,  NAPICO and certain other defendants. The
complaint  alleged that the  defendants  breached  their  fiduciary  duty to the
limited partners of certain NAPICO managed  partnerships and violated securities
laws by  making  materially  false  and  misleading  statements  in the  consent
solicitation  statements  sent to the  limited  partners  of  such  partnerships
relating  to  approval  of the  transfer  of  partnership  interests  in limited
partnerships,  owning  certain  of  the  properties,  to  affiliates  of  Casden
Properties  Inc.,  organized by an affiliate of NAPICO.  The  plaintiffs  sought
equitable relief, as well as compensatory  damages and litigation related costs.
On August 4, 1999, one investor holding one unit of limited partnership interest
in Housing Programs Limited (another  affiliated  partnership in which NAPICO is
the corporate  general  partner)  commenced a virtually  identical action in the
United States District Court for the Central District of California  against the
Partnership,  NAPICO and certain other entities.  The second action was subsumed
in the first action,  and was  certified as a class action.  On August 21, 2001,
plaintiffs filed a supplemental complaint,  which added new claims,  including a
rescission  of the transfer of  partnership  interests  and an  accounting.  The
matter was tried in October  and  November  2002.  In  November  2002,  the jury
returned  special  verdicts  against NAPICO and certain other  defendants in the
amount of  approximately  $25.2 million for  violations  of securities  laws and
against NAPICO for  approximately  $67.3 million for breaches of fiduciary duty.
In addition,  the jury awarded the plaintiffs punitive damages against NAPICO of
approximately  $92.5  million.  NAPICO and the other  defendants  have submitted
motions  seeking to set aside the verdict in its  entirety,  with oral  argument
scheduled for March 2003.  While the matter is not yet final and no judgment has
been entered,  the matter is the  responsibility  of the former  shareholders of
Casden Properties Inc. pursuant to the documents related to AIMCO's  acquisition
of Casden Properties Inc., which was completed in March 2002.

Consent Solicitation

In March 2001, a limited  partner of the  Partnership,  which acquired its units
through a tender offer, commenced a consent solicitation to remove NAPICO as the
Corporate  General  Partner of the  Partnership.  In April 2001, the Partnership
commenced an action to enjoin the  solicitation  alleging  that the  information
contained  in the  solicitation  was  materially  false  and  misleading  and in
violation of the federal  securities  laws. In November  2002, a settlement  was
reached  between  NAPICO and the limited  partner  whereby  the lawsuit  will be
dismissed,  NAPICO  will  remain the  Corporate  General  Partner and all claims
between the parties will be released.

The Corporate General Partner of the Partnership is involved in various lawsuits
arising from transactions in the ordinary course of business.  In the opinion of
management and the Corporate General Partner,  the claims will not result in any
material liability to the Partnership.

ITEM 5. OTHER INFORMATION

Millenium   Management,   LLC  ("Millenium")  and  Everest  Properties  II,  LLC
("Everest") have filed with the SEC a preliminary Consent Solicitation Statement
requesting the consent of the limited partners of Real Estate Associates Limited
III  (the   "Partnership")  to  remove  the  current  general  partners  of  the
Partnership  and to elect  Millenium  as the new  general  partner.  The General
Partners are reviewing the preliminary Consent Solicitation Statement.


<PAGE>


ITEM 6.     EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits:

         Exhibit        3  Restated   Certificate   and   Agreement  of  Limited
                        Partnership herein dated January 5, 1981 incorporated by
                        reference to the Partnership's Form S-11 No. 268983.

         Exhibit 99     Certification of Chief  Executive   Officer   and  Chief
                        Financial Officer

(b) Reports on Form 8-K filed during the quarter ended September 30, 2002:

         Current Report on Form 8-K dated August 29, 2002 and filed on September
         6,  2002,  discussing  the  dismissal  of  Deloitte & Touche LLP as the
         Registrant's  certifying  auditor and the  appointment of Ernst & Young
         LLP as the certifying auditor for the year ending December 31, 2002.


<PAGE>


                                   SIGNATURES



In accordance with the  requirements of the Exchange Act, the Registrant  caused
this  report to be  signed on its  behalf  by the  undersigned,  thereunto  duly
authorized.


                                    REAL ESTATE ASSOCIATES LIMITED III
                                    (a California limited partnership)


                                    By:   National Partnership Investments Corp.
                                          Corporate General Partner


                                    By:   /s/David R. Robertson
                                          David R. Robertson
                                          President and Chief Executive Officer


                                    By:   /s/Brian H. Shuman
                                          Brian H. Shuman
                                          Senior Vice President and Chief
                                          Financial Officer


                                    Date: March 20, 2003


<PAGE>



                                  CERTIFICATION


I, David R. Robertson, certify that:


1. I have  reviewed  this  quarterly  report  on Form  10-QSB/A  of Real  Estate
Associates Limited III;


2. Based on my  knowledge,  this  quarterly  report  does not contain any untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements made, in light of the  circumstances  under which such statements
were made, not  misleading  with respect to the period covered by this quarterly
report;


3.  Based  on my  knowledge,  the  financial  statements,  and  other  financial
information  included in this quarterly  report,  fairly present in all material
respects the financial  condition,  results of operations  and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;


4.  The  registrant's  other  certifying  officers  and  I are  responsible  for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:


      a)  Designed  such  disclosure  controls  and  procedures  to ensure  that
      material   information   relating  to  the   registrant,   including   its
      consolidated  subsidiaries,  is made  known to us by others  within  those
      entities, particularly during the period in which this quarterly report is
      being prepared;


      b) Evaluated the effectiveness of the registrant's disclosure controls and
      procedures  as of a date  within 90 days prior to the filing  date of this
      quarterly report (the "Evaluation Date"); and


      c)  Presented  in  this  quarterly   report  our  conclusions   about  the
      effectiveness  of the  disclosure  controls  and  procedures  based on our
      evaluation as of the Evaluation Date;


5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation,  to the registrant's auditors and the audit committee of
registrant's   board  of  directors  (or  persons   performing   the  equivalent
functions):


      a) All  significant  deficiencies  in the design or  operation of internal
      controls which could adversely affect the registrant's  ability to record,
      process,  summarize and report  financial data and have identified for the
      registrant's auditors any material weaknesses in internal controls; and


      b) Any fraud,  whether or not material,  that involves management or other
      employees  who  have  a  significant  role  in the  registrant's  internal
      controls; and


6. The  registrant's  other  certifying  officers  and I have  indicated in this
quarterly  report  whether or not there  were  significant  changes in  internal
controls or in other factors that could  significantly  affect internal controls
subsequent to the date of our most recent  evaluation,  including any corrective
actions with regard to significant deficiencies and material weaknesses.


Date:  March 20, 2003

                                    /s/David R. Robertson
                                    David R. Robertson
                                    President and Chief  Executive   Officer  of
                                    National Partnership Investments Corp.,
                                    equivalent of the chief executive officer of
                                    the Partnership


<PAGE>



                                  CERTIFICATION


I, Brian H. Shuman, certify that:


1. I have  reviewed  this  quarterly  report  on Form  10-QSB/A  of Real  Estate
Associates Limited III;


2. Based on my  knowledge,  this  quarterly  report  does not contain any untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements made, in light of the  circumstances  under which such statements
were made, not  misleading  with respect to the period covered by this quarterly
report;


3.  Based  on my  knowledge,  the  financial  statements,  and  other  financial
information  included in this quarterly  report,  fairly present in all material
respects the financial  condition,  results of operations  and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;


4.  The  registrant's  other  certifying  officers  and  I are  responsible  for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:


      a)  Designed  such  disclosure  controls  and  procedures  to ensure  that
      material   information   relating  to  the   registrant,   including   its
      consolidated  subsidiaries,  is made  known to us by others  within  those
      entities, particularly during the period in which this quarterly report is
      being prepared;


      b) Evaluated the effectiveness of the registrant's disclosure controls and
      procedures  as of a date  within 90 days prior to the filing  date of this
      quarterly report (the "Evaluation Date"); and


      c)  Presented  in  this  quarterly   report  our  conclusions   about  the
      effectiveness  of the  disclosure  controls  and  procedures  based on our
      evaluation as of the Evaluation Date;


5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation,  to the registrant's auditors and the audit committee of
registrant's   board  of  directors  (or  persons   performing   the  equivalent
functions):


      a) All  significant  deficiencies  in the design or  operation of internal
      controls which could adversely affect the registrant's  ability to record,
      process,  summarize and report  financial data and have identified for the
      registrant's auditors any material weaknesses in internal controls; and


      b) Any fraud,  whether or not material,  that involves management or other
      employees  who  have  a  significant  role  in the  registrant's  internal
      controls; and


6. The  registrant's  other  certifying  officers  and I have  indicated in this
quarterly  report  whether or not there  were  significant  changes in  internal
controls or in other factors that could  significantly  affect internal controls
subsequent to the date of our most recent  evaluation,  including any corrective
actions with regard to significant deficiencies and material weaknesses.


Date:  March 20, 2003

                                    /s/Brian H. Shuman
                                    Brian H. Shuman
                                    Senior Vice President and Chief   Financial
                                    Officer of  National Partnership Investments
                                    Corp., equivalent of  the  chief   financial
                                    officer of the Partnership


<PAGE>


Exhibit 99


                          Certification of CEO and CFO
                       Pursuant to 18 U.S.C. Section 1350,
                             As Adopted Pursuant to
                   Section 906 of the Sarbanes-Oxley Act of 2002



In  connection  with  the  Quarterly  Report  on Form  10-QSB/A  of Real  Estate
Associates  Limited III (the  "Partnership"),  for the  quarterly  period  ended
September 30, 2002 as filed with the Securities  and Exchange  Commission on the
date hereof (the "Report"),  David R. Robertson,  as the equivalent of the chief
executive officer of the Partnership,  and Brian H. Shuman, as the equivalent of
the chief financial officer of the Partnership,  each hereby certifies, pursuant
to  18  U.S.C.  Section  1350,  as  adopted  pursuant  to  Section  906  of  the
Sarbanes-Oxley Act of 2002, that, to the best of his knowledge:

      (1)   The Report fully complies with the  requirements of Section 13(a) or
            15(d) of the Securities Exchange Act of 1934; and

      (2)   The  information  contained in the Report  fairly  presents,  in all
            material respects, the financial condition and results of operations
            of the Partnership.


                                    /s/    David R. Robertson
                                    Name:  David R. Robertson
                                    Date:  March 20, 2003


                                    /s/    Brian H. Shuman
                                    Name:  Brian H. Shuman
                                    Date:  March 20, 2003


This  certification  accompanies  the  Report  pursuant  to  Section  906 of the
Sarbanes-Oxley  Act of 2002 and shall not,  except to the extent required by the
Sarbanes-Oxley  Act of 2002, be deemed filed by the  Partnership for purposes of
Section 18 of the Securities Exchange Act of 1934, as amended.