As long as the Realtor follows their code of ethics and rules that are governing them by your state, I think it should be fine !
Why not get a 2nd opinion from another Realtor in your area to see what they feel about that !
Loretta Leibert, Realtor, GRI
Prudential Landis Homesale Services
Fine Homes International Specialist
Office: 610-372-3200 ext. 3049
Although I haven't seen that question come up too often regarding relatives (and housing proximity), the question does get raised when one agent "owns" a neighborhood and has multiple listings within a few blocks of each other. There's sometimes a concern (by one of the owners) that the agent won't make sufficient attempts to promote that one property. On the other hand, there's a lot of benefit to having an agent with multiple nearby listings. There's the knowledge of the neighborhood, the ability to position the properties somewhat differently, the ability to coordinate open houses or the listings in direct mail, and so on.
If you'd really like that agent to be yours as well, I'd suggest talking to your sister. Get her agreement that she'd be comfortable with the situation. Then approach the agent together. That might work.
On the other hand, I'm sure there are a lot of good agents in your area. If your sister's remains uncomfortable with the possibility of both listings, you'll have to find another one to represent you.
Hope that helps.