SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, DC  20549

                                   FORM 8-K

                                CURRENT REPORT

                    PURSUANT TO SECTION 13 OR 15 (d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934

       Date of Report (date of earliest event reported)  January 9, 1997

                         BALCOR PENSION INVESTORS-III
         ------------------------------------------------------------
                           Exact Name of Registrant


Illinois                                0-11129
-----------------------------------     -----------------------------------
State or other jurisdiction             Commission file number

2355 Waukegan Road
Suite A200
Bannockburn, Illinois                   36-3164211
-----------------------------------     -----------------------------------
Address of principal                    I.R.S. Employer
executive offices                       Identification
                                        Number

60015
-----------------------------------
Zip Code


              Registrant's telephone number, including area code:
                                (847) 267-1600
<PAGE>
ITEM 2.  ACQUISITION OR DISPOSITION OF ASSETS
----------------------------------------------------------------------

The Woods Apartments

In 1983, the  Partnership funded a  $3,162,826 loan evidenced  by a  $6,840,000
promissory note and collateralized by a wrap-around third mortgage lien on  The
Woods Apartments, Austin, Texas.  The Partnership later advanced an  additional
$1,300,000 on  the  loan. The  Partnership  received $625,000  as  a  principal
reduction of the loan in  1988.  In 1993,  the Partnership purchased the  first
and second mortgage loans for a total of $2,562,433.  The Partnership  obtained
title to the property through a non-judicial foreclosure in 1994.

On January 9, 1997, the Partnership contracted to sell the property for a  sale
price  of  $11,650,000   to  an  unaffiliated   party,  Austin  Woods   Limited
Partnership, an  Illinois limited  partnership.   The purchaser  has  deposited
$100,000 into an escrow account  as earnest money.   The remainder of the  sale
price will be  payable in  cash at closing,  scheduled for  February 28,  1997.
From the proceeds of the sale, the Partnership will pay $233,000 as a brokerage
commission to an  affiliate of  the third party  providing property  management
services  for  the  property  and  will  receive  the  remaining  proceeds   of
approximately $11,417,000, less closing costs.  Of such proceeds, $100,000 will
be  retained  by  the  Partnership  and  will  not  be  available  for  use  or
distribution by the Partnership  until 90 days after  the closing. Neither  the
General Partner  nor  any affiliate  will  receive a  brokerage  commission  in
connection with  the  sale  of the  property.    The General  Partner  will  be
reimbursed by the Partnership for  actual expenses incurred in connection  with
the sale.

Affiliates of the General  Partner have simultaneously  contracted to sell  two
additional properties to affiliates of the purchaser.

The closing is subject  to the satisfaction of  numerous terms and  conditions.
There can be no assurance that all of the terms and conditions will be complied
with and, therefore, it is possible the sale of the property may not occur.  

 
ITEM 5.  OTHER EVENTS
------------------------------------

Carmel on Providence Apartments loan

In  1982,  the  Partnership  funded  a  $1,244,285  loan  collateralized  by  a
wrap-around mortgage  on  a leasehold  interest  in the  Carmel  on  Providence
Apartments, Charlotte, North Carolina, and evidenced by a wrap-around  mortgage
note in the principal amount of $3,200,000 (the "Loan").  The principal  amount
of the Loan included the principal amount of an underlying first mortgage  loan
(the "Underlying Loan").  The  borrower is required to  make  interest only  
payments  on  the Loan  through  maturity  in December 31, 1997, at which time 
the  amount of the Loan, less the  outstanding amount of the Underlying Loan, is
due.
<PAGE>
On December  23,  1996,  the Partnership  sold  its  interest in  the  Loan  to
BankAmerica Investment Corporation,  an Illinois corporation.   The sale  price
was equal  to 101.11%  of the  outstanding principal  balance of  the Loan  and
deferred interest  due  under the  terms  of  the Loan,  less  the  outstanding
principal balance  of the  Underlying Loan,  at closing.   The  sale price  was
$3,098,102.

From the proceeds of  the sale, the Partnership  paid closing costs of  $14,550
and   $115,258  to  an unaffiliated  party  as  a brokerage  commission.    The
Partnership received the remaining proceeds of approximately $2,968,000.  
Neither the General Partner nor any  affiliate will  receive a brokerage  
commission in  connection with the sale  of the  loan.   The General Partner  
will be  reimbursed by  the Partnership for actual expenses incurred in 
connection with the sale.

An affiliate  of  the  Partnership  simultaneously sold  another  loan  to  the
purchaser.


ITEM 7.  FINANCIAL STATEMENTS AND EXHIBITS
----------------------------------------------------------------------

     (A)  FINANCIAL STATEMENTS AND EXHIBITS:

            None

     (B)  PRO FORMA FINANCIAL INFORMATION:

            None

     (C)  EXHIBITS:

          (2)  Agreement of Sale and amendment thereto relating to the sale of 
               The Woods Apartments, Austin, Texas.

          (99) Purchase and Sale Agreement relating to the sale of the loan
               collateralized by the Carmel on Providence Apartments, 
               Charlotte, North Carolina.

     No information is required under Items 1, 3, 4, 6 and 8 and these items
have, therefore, been omitted.
<PAGE>
Signature
-------------

     Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.


                    BALCOR PENSION INVESTORS-III

                         By:  Balcor Mortgage Advisors-II, an Illinois
                              general partnership, its general partner

                         By:  RGF-Balcor Associates-II, an Illinois
                              general partnership, a partner

                         By:  The Balcor Company, a Delaware corporation,
                              a partner

                         By:  /s/ Jerry M. Ogle
                              ------------------------------------
                                  Jerry M. Ogle, Vice President 
                                  and Secretary

Dated:  January 24, 1997
<PAGE>
[{"type": "8-K", "sequence": "1", "description": "JANUARY 24, 1997 8-K FOR BPI III", "secsgml_size_bytes": 6778}]
{"company-data": {"conformed-name": "BALCOR PENSION INVESTORS III", "cik": "0000357329", "assigned-sic": "6500", "irs-number": "363164211", "state-of-incorporation": "IL", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "8-K", "act": "34", "file-number": "000-11128", "film-number": "97510441"}, "business-address": {"street1": "2355 WAUKEGAN ROAD", "street2": "SUITE A200", "city": "DEERFIELD", "state": "IL", "zip": "60015", "phone": "7086772900"}, "mail-address": {"street1": "2355 WAUKEGAN ROAD", "street2": "SUITE A200", "city": "DEERFIELD", "state": "IL", "zip": "60015"}}
SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, DC  20549

                                   FORM 8-K

                                CURRENT REPORT

                    PURSUANT TO SECTION 13 OR 15 (d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934

       Date of Report (date of earliest event reported)  January 9, 1997

                         BALCOR PENSION INVESTORS-III
         ------------------------------------------------------------
                           Exact Name of Registrant

Illinois                                0-11129
-----------------------------------     -----------------------------------
State or other jurisdiction             Commission file number

2355 Waukegan Road
Suite A200
Bannockburn, Illinois                   36-3164211
-----------------------------------     -----------------------------------
Address of principal                    I.R.S. Employer
executive offices                       Identification
                                        Number

60015
-----------------------------------
Zip Code

              Registrant's telephone number, including area code:
                                (847) 267-1600
ITEM 2.  ACQUISITION OR DISPOSITION OF ASSETS
----------------------------------------------------------------------

The Woods Apartments

In 1983, the  Partnership funded a  $3,162,826 loan evidenced  by a  $6,840,000
promissory note and collateralized by a wrap-around third mortgage lien on  The
Woods Apartments, Austin, Texas.  The Partnership later advanced an  additional
$1,300,000 on  the  loan. The  Partnership  received $625,000  as  a  principal
reduction of the loan in  1988.  In 1993,  the Partnership purchased the  first
and second mortgage loans for a total of $2,562,433.  The Partnership  obtained
title to the property through a non-judicial foreclosure in 1994.

On January 9, 1997, the Partnership contracted to sell the property for a  sale
price  of  $11,650,000   to  an  unaffiliated   party,  Austin  Woods   Limited
Partnership, an  Illinois limited  partnership.   The purchaser  has  deposited
$100,000 into an escrow account  as earnest money.   The remainder of the  sale
price will be  payable in  cash at closing,  scheduled for  February 28,  1997.
From the proceeds of the sale, the Partnership will pay $233,000 as a brokerage
commission to an  affiliate of  the third party  providing property  management
services  for  the  property  and  will  receive  the  remaining  proceeds   of
approximately $11,417,000, less closing costs.  Of such proceeds, $100,000 will
be  retained  by  the  Partnership  and  will  not  be  available  for  use  or
distribution by the Partnership  until 90 days after  the closing. Neither  the
General Partner  nor  any affiliate  will  receive a  brokerage  commission  in
connection with  the  sale  of the  property.    The General  Partner  will  be
reimbursed by the Partnership for  actual expenses incurred in connection  with
the sale.

Affiliates of the General  Partner have simultaneously  contracted to sell  two
additional properties to affiliates of the purchaser.

The closing is subject  to the satisfaction of  numerous terms and  conditions.
There can be no assurance that all of the terms and conditions will be complied
with and, therefore, it is possible the sale of the property may not occur.  

 
ITEM 5.  OTHER EVENTS
------------------------------------

Carmel on Providence Apartments loan

In  1982,  the  Partnership  funded  a  $1,244,285  loan  collateralized  by  a
wrap-around mortgage  on  a leasehold  interest  in the  Carmel  on  Providence
Apartments, Charlotte, North Carolina, and evidenced by a wrap-around  mortgage
note in the principal amount of $3,200,000 (the "Loan").  The principal  amount
of the Loan included the principal amount of an underlying first mortgage  loan
(the "Underlying Loan").  The  borrower is required to  make  interest only  
payments  on  the Loan  through  maturity  in December 31, 1997, at which time 
the  amount of the Loan, less the  outstanding amount of the Underlying Loan, is
due.
On December  23,  1996,  the Partnership  sold  its  interest in  the  Loan  to
BankAmerica Investment Corporation,  an Illinois corporation.   The sale  price
was equal  to 101.11%  of the  outstanding principal  balance of  the Loan  and
deferred interest  due  under the  terms  of  the Loan,  less  the  outstanding
principal balance  of the  Underlying Loan,  at closing.   The  sale price  was
$3,098,102.

From the proceeds of  the sale, the Partnership  paid closing costs of  $14,550
and   $115,258  to  an unaffiliated  party  as  a brokerage  commission.    The
Partnership received the remaining proceeds of approximately $2,968,000.  
Neither the General Partner nor any  affiliate will  receive a brokerage  
commission in  connection with the sale  of the  loan.   The General Partner  
will be  reimbursed by  the Partnership for actual expenses incurred in 
connection with the sale.

An affiliate  of  the  Partnership  simultaneously sold  another  loan  to  the
purchaser.

ITEM 7.  FINANCIAL STATEMENTS AND EXHIBITS
----------------------------------------------------------------------

     (A)  FINANCIAL STATEMENTS AND EXHIBITS:

            None

     (B)  PRO FORMA FINANCIAL INFORMATION:

            None

     (C)  EXHIBITS:

          (2)  Agreement of Sale and amendment thereto relating to the sale of 
               The Woods Apartments, Austin, Texas.

          (99) Purchase and Sale Agreement relating to the sale of the loan
               collateralized by the Carmel on Providence Apartments, 
               Charlotte, North Carolina.

     No information is required under Items 1, 3, 4, 6 and 8 and these items
have, therefore, been omitted.
Signature
-------------

     Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.

                    BALCOR PENSION INVESTORS-III

                         By:  Balcor Mortgage Advisors-II, an Illinois
                              general partnership, its general partner

                         By:  RGF-Balcor Associates-II, an Illinois
                              general partnership, a partner

                         By:  The Balcor Company, a Delaware corporation,
                              a partner

                         By:  /s/ Jerry M. Ogle
                              ------------------------------------
                                  Jerry M. Ogle, Vice President 
                                  and Secretary

Dated:  January 24, 1997