Rachelle Gardner is an awesomesauce literary agent from WordServe Literary Group, and she's got some great pointers on red flags that writers should be noticing with potential agents. For instance, if your agent wants you to pay for things that normally writers don't pay for -- or if there are hidden fees tucked into your contract.
Remember, a literary agent's job is to sell your manuscript. If they don't sell it, they don't get paid -- which means they should be making money from book sales, not from editing fees or writer contracts. Read Rachelle's blog entry for more details, and make note of things to watch for!
Questionable Practices by Literary Agents