I stand in agreement with Anonymous M's answer. As someone who has worked in architecture offices in the past, I interpret the professor's statements as meaning:
"Yes, in this particular instance it is OK to go beyond the 500-word limit, but do not assume you can ignore or circumvent any other guideline without good reason, and without checking with me in advance. Also, even if you are allowed to go beyond the 500-word limit, this is not an authorization for you to go overboard, rather it means for you to stick to the limit as much as possible, but you will not be penalized if you go slightly above the limit. However, if you go significantly beyond the word limit simply because you are incapable of masterfully summarizing your arguments, and you are just adding words without stating anything of significant value, or even keeping a good level of quality, you will almost certainly be penalized for it."
Since you mention that you are in an architecture "class" (rather than a course) and that you are doing an "essay" (rather than a full-blown architectural design project), this suggests to me that you might just be taking an architecture class as part of another course, or that perhaps you are not particularly familiar with the way things go in architecture as a business practice or in academia.
Without exaggeration, architecture is certainly in the top 10 list of the most cutthroat and merciless environments you can find yourself in. Clients are often ruthless, stingy and nasty, profit margins are razor-thin unless you work for a particularly large office, there is little tolerance for incompetence and laziness, everybody adopts an attitude of no-frills, no-nonsense, and are brutally honest in their criticism of your work (say, "Steve Jobs-style" level of honesty).
Even though this particular professor may (or may not) be more gentle than the average architecture instructor (hard to tell without more information), I would advise you to quickly develop a thick skin for criticism (if you have not done so already), do not take it too personally (even if it may seem personal) and be careful to not deviate from the guidelines without good reason, or without making sure that your final work is actually really better because you were allowed to go beyond the word limit.