Beware that some literary agencies make their profits not by selling books to publishers, but by selling "services" to writers. While this may not be illegal, it is certainly unethical. For instance, the Woodside Literary Agency in New York has an approach that will take more and more from the writer. In their initial advertising there is no mention of a reading fee, but after seeing a sample of the author's work they ask for $75. Then, after reviewing the author's novel, they ask for $250 to represent him for a year. Others have reported being asked for $500 for the year.
Some legitimate agencies charge modest fees to cover photocopy expenses, but they are one-time charges and the author receives something in return: copies of a book distributed to publishers. Before sending any money to anyone, you should ask for a list of recent sales the agency has made.
If you know of other agencies that make their living by charging writers fees, send e-mail to ptate@aol.com. We will post them here.