PA-44 flight instructor with a student reported the right engine caught on fire while stopped at the run-up area before takeoff. The fire department put the fire out after the pilots exited the aircraft.

Narrative

Earlier this evening around XA:00pm local time; student and myself pre-flighted Seminole at the Flight School ramp. It was student's first multi-engine lesson. We used the checklist and went over each item on the checklist for the aircraft he would be flying. Student is a CFI and CFII at the Flight School with me and understands the importance of a good pre-flight check. After the pre-flight; we started the engines. After getting the weather; 'A'; 300@4kts; visibility 10sm; broken at 10;000; broken at 15;000; 27C; Dewpoint 6C; Alt 30.10; we got taxi clearance and taxied to the run-up area for [Runway] XXR.Upon reaching the run-up area for XXR; we performed the Before Takeoff - Ground Check of the aircraft. We verified the flight controls were free and correct. Then we set both engine RPMs to 2000 and set both engine mixtures for altitude. We check the propeller governor control by reducing both prop lever controls to 1800 RPM and verifying it holds that set RPM. We put the prop control levers back full forward and set the RPM back to 2000 RPM for each engine. The next item on the checklist was to check the magnetos for both engines. Both Left and Right magnetos on the left engine passed and were within standards. The Left magneto on the right engine initially dropped 200 RPM; which is out of limits for the POH being a max drop of 175 RPM. Student turned the Left magneto back on for the right engine and we both agreed we should check it again. After waiting about 10 seconds; we shut off the left magneto for the right engine a second time; and this time the RPM dropped 500 RPM instantly and continued to decrease and the engine ran very rough. I smelled smoke and looked outside the window to see the right engine was on fire. I immediately pull the mixture controls to idle cut off and put the fuel selector valve to the OFF position. I called ground on the radio and told them a fire started in the XXR run-up area and we need assistance. Student and I shut down the electrical switches and exited the aircraft. As I was opening the door; Student accidentally feathered both propellers. We quickly exited the aircraft and got out of harms way uninjured. The airport fire department came and put the fire out within just a few minutes of starting.I'm not sure how the fire started during the magneto check; or if it possibly was a fuel line issue that just so happened that time of the magneto check. Fortunately; doing run-ups before flight is a standard practice and neither student or myself got injured.